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Housing follows the laws of supply and demand like everything else. Cities with lots of jobs draw in migrant workers. Cities that raise minimum wage bring in mo

by hueving 11y ago

Housing follows the laws of supply and demand like everything else. Cities with lots of jobs draw in migrant workers. Cities that raise minimum wage bring in more workers from neighboring areas with lower wages. Those people need a place to live.

throwaway1979 11y ago
Housing should follow the normal economic laws but it doesn't seem to. Part of it is regulation, and part of it is an odd kind of scarcity. If there were no housing regulations, I'm sure you' get a lot of new housing in the Bay area and people would live in there (despite it being potentially unsafe). Heck .. I was actually entertaining the live-in-a-container option :-p I'm still struggling to understand the scarcity aspect of housing. Supply of land isn't increasing so you'd think the asset would increase in price over time. That said, population isn't growing that much - prices in a city like Toronto have reached epic proportions fueled by a combination of speculation and foreign investment. To me, the problem lies in the fact that we are living in a highly leveraged economy. Will that ever stop? Doesn't seem like it.
- hueving 11y ago
  You seem to be fundamentally ignoring the simplicity of supply and demand. If people could offer container housing legally, they would. However, they can't so the supply of legal housing is constrained. This drives the price up. The same applies to any protectionist laws the greater fuckwad property owners in the area introduce. Nobody wants to see their property value diluted so they vote against every single housing measure as long as the demand is there.
EliRivers 11y ago
Housing follows the laws of supply and demand like everything else. Certainly not like everything else. The demand for housing is a function of (amongst other things) how easily people can borrow the money to pay for one, how much the interest on that debt is, and what they guess is going to happen to prices in the future. Under simple primary school "supply and demand" economic theory, increasing price leads to a reduction in demand, but it's common to see increases in house prices lead to increases in demand, and vice-versa. To simply say that housing follows supply and demand is such a simplified view that it's more wrong than right.
- hueving 11y ago
  Sorry, you are confusing cause and effect. It's a common mistake. The housing prices increasing means demand had already gone up. An increase doesn't leaf to more demand. If people were paying increased prices, it means the demand has increased enough for the seller to make the sale at the inflated price.
  - EliRivers 11y ago
    You are incorrect. Also a common mistake. An increase doesn't lead to more demand. Yes it does. People see prices going up. They see the front page of a tabloid paper declaring it repeatedly. They panic about "missing the boat" and other such. They see people who did buy sitting on sudden equity gains, and they want some of that. They were going to wait, but now they won't. They stretch, and go out and buy. Extra people deciding to buy increases the demand, which then increases the prices again. Lenders see their balance sheets looking better and better as their debtors' equity increases, so they can lend more and at lower interest rates. The increasing house prices have led to an increase in mortgage availability which leads to more people able to buy houses which increases demand again. Increasing house prices increase demand increases prices increases demand, right up to the point where enough people simply cannot get the mortgage necessary. As markets crash and people see prices dropping, they decide not to buy. They will wait until next month/quarter/year, when prices will be cheaper still. They also flinch at the idea of negative equity, especially if they remember it from the last crash. Demand drops. Falling prices makes lenders demand higher deposits to protect themselves from dropping house prices, so people who could buy suddenly can't; the falling prices cause a drop in demand. Mortgage lenders watch their debtors equity vanish and find themselves compelled by balance-sheet regulations to change their lending; the falling prices causes a drop in ability of people to get a mortgage, so demand drops. Often, the lop-sided economy suffers from the crash and people have less money so they can't spend so much servicing a mortgage, so demand drops. Decreasing house prices decrease demand. Housing is also one of the few things non-investors buy that they call an investment. Watching the biggest potential purchase they will ever make bleed makes it a much less attractive "investment". Demand drops. Falling house prices lessen people's interest in buying a house. Falling house prices cause lower demand, which causes lower prices which causes lower demand. But this is crazy. Surely this would lead to some kind of endless boom-bust cycle in house prices.

by hueving 11y ago

throwaway1979 11y ago

Housing should follow the normal economic laws but it doesn't seem to. Part of it is regulation, and part of it is an odd kind of scarcity. If there were no housing regulations, I'm sure you' get a lot of new housing in the Bay area and people would live in there (despite it being potentially unsafe). Heck .. I was actually entertaining the live-in-a-container option :-p I'm still struggling to understand the scarcity aspect of housing. Supply of land isn't increasing so you'd think the asset would increase in price over time. That said, population isn't growing that much - prices in a city like Toronto have reached epic proportions fueled by a combination of speculation and foreign investment. To me, the problem lies in the fact that we are living in a highly leveraged economy. Will that ever stop? Doesn't seem like it.

hueving 11y ago
You seem to be fundamentally ignoring the simplicity of supply and demand. If people could offer container housing legally, they would. However, they can't so the supply of legal housing is constrained. This drives the price up. The same applies to any protectionist laws the greater fuckwad property owners in the area introduce. Nobody wants to see their property value diluted so they vote against every single housing measure as long as the demand is there.

EliRivers 11y ago

Housing follows the laws of supply and demand like everything else. Certainly not like everything else. The demand for housing is a function of (amongst other things) how easily people can borrow the money to pay for one, how much the interest on that debt is, and what they guess is going to happen to prices in the future. Under simple primary school "supply and demand" economic theory, increasing price leads to a reduction in demand, but it's common to see increases in house prices lead to increases in demand, and vice-versa. To simply say that housing follows supply and demand is such a simplified view that it's more wrong than right.

hueving 11y ago
Sorry, you are confusing cause and effect. It's a common mistake. The housing prices increasing means demand had already gone up. An increase doesn't leaf to more demand. If people were paying increased prices, it means the demand has increased enough for the seller to make the sale at the inflated price.
- EliRivers 11y ago
  You are incorrect. Also a common mistake. An increase doesn't lead to more demand. Yes it does. People see prices going up. They see the front page of a tabloid paper declaring it repeatedly. They panic about "missing the boat" and other such. They see people who did buy sitting on sudden equity gains, and they want some of that. They were going to wait, but now they won't. They stretch, and go out and buy. Extra people deciding to buy increases the demand, which then increases the prices again. Lenders see their balance sheets looking better and better as their debtors' equity increases, so they can lend more and at lower interest rates. The increasing house prices have led to an increase in mortgage availability which leads to more people able to buy houses which increases demand again. Increasing house prices increase demand increases prices increases demand, right up to the point where enough people simply cannot get the mortgage necessary. As markets crash and people see prices dropping, they decide not to buy. They will wait until next month/quarter/year, when prices will be cheaper still. They also flinch at the idea of negative equity, especially if they remember it from the last crash. Demand drops. Falling prices makes lenders demand higher deposits to protect themselves from dropping house prices, so people who could buy suddenly can't; the falling prices cause a drop in demand. Mortgage lenders watch their debtors equity vanish and find themselves compelled by balance-sheet regulations to change their lending; the falling prices causes a drop in ability of people to get a mortgage, so demand drops. Often, the lop-sided economy suffers from the crash and people have less money so they can't spend so much servicing a mortgage, so demand drops. Decreasing house prices decrease demand. Housing is also one of the few things non-investors buy that they call an investment. Watching the biggest potential purchase they will ever make bleed makes it a much less attractive "investment". Demand drops. Falling house prices lessen people's interest in buying a house. Falling house prices cause lower demand, which causes lower prices which causes lower demand. But this is crazy. Surely this would lead to some kind of endless boom-bust cycle in house prices.