5 ms·

If supply goes up and demand is fixed, prices go down.

by endtime 12y ago

Karunamon 12y ago
..in an ideal system with completely rational actors. People will sit on properties that are not selling and not touch the price.
- stephencanon 12y ago
  And those people will eventually go bankrupt and the rental rates on their properties will reset. The market can stay irrational for arbitrarily long times, but not forever.
  - dragonwriter 12y ago
    > The market can stay irrational for arbitrarily long times, but not forever. Civilization, OTOH, cannot exist for arbitrarily long times (the heat death of the universe presents a pretty firm outer boundary), so the fact that the market can stay irrational for arbitrarily long times, but not forever, should not be seen as reassuring, or even meaningful. Or, to quote Keynes, "In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again."
  - Karunamon 12y ago
    The time it takes that to happen may be so long as to be effectively meaningless. A rational person holding out for the "right" renter willing to pay the higher price would lower their prices sooner, but as previously established, people are not rational. Given the landlords that are holding multiple properties, they may just let the surplus profit soak up the loss from leaving the place without tenant. Hiou linked a few good (and actually rational) reasons why this may happen, as well: http://www.ezracompany.com/2012/04/30/why-do-landlords-let-spaces-remain-vacant-2/ http://www.ezracompany.com/2012/04/30/why-do-landlords-let-s... The end result is that it's not as simple as ECON101 supply and demand.
  - x0x0 12y ago
    Prop 13 means carrying costs can be extraordinarily low.
    - stephencanon 12y ago
      I think any serious proposal to get rid of rent control would necessarily be tied to getting rid of prop 13.
- wuliwong 12y ago
  Are you arguing that if supply increases in a real market the prices won't go down?

If supply goes up and demand is fixed, prices go down.

by endtime 12y ago

If supply goes up and demand is fixed, prices go down.

..in an ideal system with completely rational actors. People will sit on properties that are not selling and not touch the price.

stephencanon 12y ago
And those people will eventually go bankrupt and the rental rates on their properties will reset. The market can stay irrational for arbitrarily long times, but not forever.
- dragonwriter 12y ago
  > The market can stay irrational for arbitrarily long times, but not forever. Civilization, OTOH, cannot exist for arbitrarily long times (the heat death of the universe presents a pretty firm outer boundary), so the fact that the market can stay irrational for arbitrarily long times, but not forever, should not be seen as reassuring, or even meaningful. Or, to quote Keynes, "In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again."
- Karunamon 12y ago
  The time it takes that to happen may be so long as to be effectively meaningless. A rational person holding out for the "right" renter willing to pay the higher price would lower their prices sooner, but as previously established, people are not rational. Given the landlords that are holding multiple properties, they may just let the surplus profit soak up the loss from leaving the place without tenant. Hiou linked a few good (and actually rational) reasons why this may happen, as well: http://www.ezracompany.com/2012/04/30/why-do-landlords-let-spaces-remain-vacant-2/ http://www.ezracompany.com/2012/04/30/why-do-landlords-let-s... The end result is that it's not as simple as ECON101 supply and demand.
- x0x0 12y ago
  Prop 13 means carrying costs can be extraordinarily low.
  - stephencanon 12y ago
    I think any serious proposal to get rid of rent control would necessarily be tied to getting rid of prop 13.
wuliwong 12y ago
Are you arguing that if supply increases in a real market the prices won't go down?