[HN Gopher] Supply constraints do not explain house price, quant...
___________________________________________________________________
Supply constraints do not explain house price, quantity growth
across US cities
Author : pessimizer
Score : 117 points
Date : 2025-03-19 12:56 UTC (10 hours ago)
(HTM) web link (www.nber.org)
(TXT) w3m dump (www.nber.org)
| ptaffs wrote:
| It's behind a paywall, I think. Do they talk about money
| laundering? https://alessa.com/blog/real-estate-money-laundering-
| red-fla... https://trustforlondon.org.uk/research/faulty-towers-
| underst...
| https://www.thedailyupside.com/economics/international-econo...
| tokai wrote:
| No
| tobyjsullivan wrote:
| You might see this text and a download button below the email
| form.
|
| > all visitors to the NBER website are eligible for 3 free
| downloads each year. You have used 0 of 3.
|
| Given the text, I assume some people may not get the download
| button.
| dublinben wrote:
| Can you access the direct URL of the PDF?
| https://www.nber.org/system/files/working_papers/w33576/w335...
| Tewboo wrote:
| Supply constraints can't fully account for the varied growth in
| house prices and quantities across US cities. Economic dynamics
| are more complex.
| btilly wrote:
| But "can't fully account" does not imply "aren't a major
| factor".
|
| I would look at the paper in more detail, but it is not
| available to me.
| Earw0rm wrote:
| Changes in fashion and lifestyle can shift demand towards types
| of housing that are more difficult to fulfil, supply-wise.
|
| Essentially if the young and upwardly mobile want suburban
| sprawl, it's easy to build more of it until the price comes
| down. If they demand city-center condos, that's a little
| trickier.
| lr4444lr wrote:
| Scanning the paper, I don't see an answer to the first question I
| have if I assume their basic premise (that house price growth
| correlates to income growth): is the actual profit on home
| construction constant (or even shrinking)? One would assume it
| would be, if their data also controlled for confounding factors
| like regulatory limits, economic stagnation, etc.
|
| In other words, it is my position that the burden of proof should
| rest on people who claim that the laws of supply and demand fail
| _to explain what the obstacle is_ to equilibrium in the market
| they 're studying: why if I increase supply does price not come
| down? My instinct is that it's just more expensive to build homes
| on the same profit margin than it was over 40 years ago, when
| their data sampling begins. I don't believe that the real estate
| industry suddenly had a collective awakening to greed.
| ddorian43 wrote:
| Maybe investors can stay solvent longer than you can stay
| homeless, or stay with 1 hour commute, or new builds coming up
| quick enough.
| mouse_ wrote:
| Good answer
| absolutelastone wrote:
| Perhaps this time will be special, given so much government
| protection (i.e., market manipulation to maintain house
| prices).
|
| But investors at the current scale includes vast numbers of
| individuals' personal wealth and retirement accounts. I'd
| expect them to jump out well before they personally reach
| insolvency if fear ever overtakes greed.
| lazide wrote:
| Real estate is very illiquid - and 'valuations are high,
| but the market is grinding to a half because demand is
| dying due to increased borrowing costs' is exactly when it
| is nearly impossible to get out.
|
| Once things 'snap' and it starts to shift, well... then
| it's too late.
| llamaimperative wrote:
| It's the land price. Rising land prices are the problem, and
| land is in completely fixed supply. You cannot induce more
| supply with rising prices. Land is the dominating factor, ergo
| local variations in _housing_ elasticity don 't really matter.
| Clearly there is some inelastic thing that is eating all the
| increased local income without inducing more supply: it's the
| land.
|
| Edit: To the people saying "you can build more on each piece of
| land!" sure you can. And that should definitely mitigate price
| increases, but that's exactly what this paper says actually
| _isn 't_ predictive of prices, clearly because cost is
| dominantly driven by something that _isn 't_ affected by this
| elasticity. The value of higher density development gets
| immediately baked into the land prices, which then _does not
| induce more supply_ of land.
| lazide wrote:
| Land prices have been rising because of easily available
| funds.
| llamaimperative wrote:
| Land prices have been rising mostly because of productivity
| gains. Land is completely free. There is no inherent cost
| to it. All cost is derived from its productive power, and
| productive power rises as technology improves and as people
| congregate in greater density.
|
| You could outlaw loans altogether and land would still not
| be anywhere close to free.
| calvinmorrison wrote:
| with enough price you can raise supply of anything.
| dragonwriter wrote:
| "Supply" in economics is the function mapping market
| clearing price to quantity supplied. Even if all supply
| curves slope upward, that's not increasing supply with
| price, it is increasing quantity supplied with price.
| calvinmorrison wrote:
| or in dubai you just make more land. most of the earth is
| covered in water.
| masterj wrote:
| Land is fixed, but land-per-dwelling is not if you build more
| densely
| prawn wrote:
| The same land is more valuable if regulations permit higher
| density development.
| harrison_clarke wrote:
| if you permit more density on a small amount of land, the
| value of that land will go up. there's only a few places
| to put the new units, so the good land is scarce, and the
| price goes up
|
| if you do it over a whole city, i'm not sure it still
| holds. not as much, anyway, since the developers have
| more choices on where to build
| prawn wrote:
| I'm not sure that's an experiment we'd see unfold due to
| NIMBYism. (Not commenting on whether that's an
| appropriate reaction, just that it's inevitable.) So I
| wonder if within realistic constraints it's still a
| fairly safe assumption?
| harrison_clarke wrote:
| the city i'm in has done it up to 4 units. it's pretty
| recent (less than a year, i think), so i don't expect to
| see much effect yet
|
| NIMBYs did indeed get involved: you can build up to 4
| units in basically any residential zone except for the
| "rich people" part of town
|
| more cities seem to be doing this sort of thing.
| hopefully we'll have more/better papers on it in the near
| future. (and hopefully it works)
| epistasis wrote:
| But trying to suppress land prices by limiting its uses
| just pushes those price increases nearby.
|
| The most disastrous idea in urban planning is that prices
| can be kept low by limiting use, and trying to preserve
| "affordability" for a narrow slice of the middle class.
| It has failed entirely.
| llamaimperative wrote:
| No one in this thread is proposing that
| prawn wrote:
| I'm not aware of anywhere that does this? Limitations on
| use are popular with residents wanting to maintain the
| character/density of their area.
| ipsento606 wrote:
| land is in fixed supply, but the amount of land needed per
| housing unit can be reduced by easing regulatory limits on
| density
| inglor_cz wrote:
| Lots of people can live in a single unit of land, unless
| local zoning rules actively forbid that.
|
| Tokyo occupies about twice as much land as Los Angeles, but
| has four times as many people.
|
| Too many American cities forbid even relatively modest
| density such as duplexes or small apartment buildings (with,
| say, 6 apartments per building).
|
| Demanding that people in metropolitan regions build
| exclusively single family homes on large lots is insanely
| uneconomic, and, arguably, a failure of democracy at a local
| level.
| bobthepanda wrote:
| You also don't even have to urbanize all that much to get
| higher density.
|
| Nassau County in New York is one of the birthplaces of
| postwar suburbia and has a population density higher than
| Los Angeles County, ranking at 22nd in the country. (4,705
| people per square mile vs 2,420.)
| ben_w wrote:
| To add to your edit:
|
| Lots of land is, literally, dirt cheap.
|
| There's externalities in having a home that aren't just the
| land itself, but also the infrastructure per person. The
| infrastructure costs are why very few people are buying up
| land in e.g. California City[0] and popping a cheap
| concrete[1] or steel[2] box (depending on your preference of
| 3D printing or prefab/shipping container houses) in the
| desert for less than many people here earn per month.
|
| Did you want a road with that house? Running water?
| Electricity? Internet? A police force?
|
| Yes, these things are all doable. But they also add to the
| value proposition of a property ("it's in a good area"),
| driving up demand, meaning people can charge more for the
| land, and if you're going to spend a lot more on the land
| anyway then you might as well make the structure of the home
| itself a bit nicer, and it all blows up rapidly.
|
| Police in particular are currently getting more expensive
| thanks to Baumol's cost disease, because policing isn't
| automated: https://en.wikipedia.org/wiki/Baumol_effect
|
| I'm not sure how costs of sewage etc. change with increased
| population density. Pipes have to get wider per person, but
| low-density also means they're longer.
|
| [0] https://www.landwatch.com/kern-county-california-
| recreationa...
|
| [1] https://web.archive.org/web/20180926121023/https://www.bu
| sin...
|
| [2] https://www.alibaba.com/showroom/prefab-container-
| house.html
| to11mtm wrote:
| > Did you want a road with that house? Running water?
| Electricity? Internet? A police force?
|
| School systems are a huge factor in this for many folks as
| well.
| bobthepanda wrote:
| IIRC where suburbs get the short end of the stick is
| lifecycle replacement. The primary costs for replacing
| pipes is in labor hours, not really pipe size, and it takes
| longer to replace more miles of pipe.
| mrangle wrote:
| Respectfully, why would data be controlled for "regulatory
| limits" and "economic stagnation"? Regulation is a constant
| factor, historically, not something that would be controlled
| for. You could have something like a "regulatory constant" but
| then you would need one, historically, to make it meaningful.
| It would also likely have to be local. None of that will exist.
| How exactly do you define "economic stagnation" and how would
| one control for it, assuming for one second that would be
| desirable to do so?
|
| There is no "law of supply and demand" in the real market, only
| in textbooks. There is only the factor of supply and demand.
| Therefore, raw supply and demand is not an assumed default
| explanation for pricing. No one is obligated to explain why
| supply doesn't seem to explain price. Though, anyone is welcome
| to pitch as to why it might for a particular circumstance.
|
| Other variables that are sometimes interlinked: international
| cash buyers, institutional cash buyers, global dollar and
| therefore asset and commodity value in USD (inflation), skilled
| labor costs and availability, interest rates, the white and
| blue collar unemployment rates, changing lending criteria, the
| cost of gasoline, regional population fluctuations, the bond
| market, etc.
| johngladtj wrote:
| Regulation is not a constant factor.
| btilly wrote:
| Regulation is not a constant factor. It varies from place to
| place, and has generally increased over time.
| mrangle wrote:
| You're misusing the word "factor".
|
| Regulation is always a factor in the United States. Whether
| it is a significant or insignificant factor is the
| question. Regulation is historically in flux, and local,
| which is why it can't be controlled for. And why would it
| be, besides?
|
| Perhaps I misapplied the word "constant". What I meant to
| say is that theoretically there could be a varying formal
| measurement, but that this is impractical for the reasons
| stated.
| rattlesnakedave wrote:
| > why would data be controlled for "regulatory limits" and
| "economic stagnation"
|
| because they significantly impact housing markets but aren't
| the primary variables being studied
|
| > Regulation is a constant factor
|
| Wow
| mrangle wrote:
| How can regulation be "controlled for"?
|
| "Constant" was misused as a formal term, as admitted.
| Regulation is still always a varying factor and can't be
| controlled for. My other points stand.
| ToucanLoucan wrote:
| > There is no "law of supply and demand" in the real market,
| only in textbooks.
|
| Louder for the people in the back.
|
| If sellers are not in a particular rush to part with a given
| good, for whatever reason, there is no reason for an over-
| supply to lead to lower prices. They will simply hold stock
| until such time as it sells, confident that it will. Does
| that always pay off? Not necessarily but with housing both in
| the selling and renting markets, it does so often that I
| don't think any particular holder of real estate is too
| worried about it. You can sit on vacant property to your
| heart's content and somewhere down the line, someone, or some
| company, will likely meet or exceed what you're looking to
| get out of it.
|
| Real estate also has the handy benefit in it's basically
| guaranteed to hold value, and it's unexpected if it doesn't
| increase in value year over year.
| mlyle wrote:
| > If sellers are not in a particular rush to part with a
| given good, for whatever reason, there is no reason for an
| over-supply to lead to lower prices.
|
| This just says that supply isn't very elastic at that
| point. It's hardly the only market where supply or demand
| isn't extremely elastic. Understanding that supply and
| demand might not be straight lines of unit slope is an econ
| 101 concept.
|
| > Real estate also has the handy benefit in it's basically
| guaranteed to hold value, and it's unexpected if it doesn't
| increase in value year over year.
|
| And the unfortunate cost called property tax which puts a
| drag on any earnings and compounds losses.
|
| It's an asset class like any other. My house did a real 2x
| after California's low property taxes over the past 20
| years, plus there's my owner's imputed rent which is maybe
| worth another 0.5x for a total return of 2.5x. It's also
| had tax deferral on the earnings and the values are a
| little less volatile than the stock market. OTOH my
| equities did more like 8x over this time.
| mrspuratic wrote:
| In Ireland as well as property tax we also have a
| dereliction charge for sites/properties, it's been on the
| books since 1990, but recently being leveraged (clumsily)
| to punish land hoarding in urban areas. It's currently 7%
| p.a. of what somebody declares the market value of the
| land is, and the land can also be subject to a CPO unless
| remedied. The LPT local property tax is a fraction of 1%
| p.a. typically 0.1% (subject to regional and valuation
| variables).
| mlyle wrote:
| Here in California, we tend to have total property tax
| rates of ~1.5%, which includes improvements like
| buildings. For various reasons, this is lower than the
| rest of the country which is more like 2-2.5%. But also,
| the assessed values of buildings tends to be artificially
| low in most places. These low assessed values discourage
| real estate changing hands, because the new owner would
| often have to pay more.
|
| There's a lot of economists who think we should have a
| higher tax rate, but only on the true market value of the
| land, to promote efficient usage of real property.
| gambiting wrote:
| >>If sellers are not in a particular rush to part with a
| given good, for whatever reason, there is no reason for an
| over-supply to lead to lower prices.
|
| Well but then there is no oversupply, is there? Like if I
| have an apple and you want to buy an apple, the supply of
| apples is zero UNLESS I decide to sell. In the meantime I
| could have 10 thousand apples and the supply is still zero
| until I want to sell. Houses that are built and not
| available for sale are not part of the supply.
| giantrobot wrote:
| > If sellers are not in a particular rush to part with a
| given good, for whatever reason, there is no reason for an
| over-supply to lead to lower prices.
|
| This issue is compounded because sellers have to them
| become buyers. People don't sell their house and then drive
| themselves into the ocean. For most people a house is where
| they live. If they sell it they need to buy a new one.
|
| Their motivation for selling is then a function of the
| house's potential sale value, their new house's cost, and
| financing rates for them and their potential buyers. If
| they currently have a very low fixed rate on their house
| then a new house at a higher rate isn't attractive
| depending on their current house's potential sale value.
|
| This has the effect of constraining supply _and_ demand.
| lr4444lr wrote:
| That's like saying "there are no perfect spheres in the real
| world, ergo Newton's Laws are bunk."
|
| I am not a simpleton. I am aware that perfectly elastic
| supply and demand curves pushing to static equilibrium is not
| how the world works in practice. But if economics as a study
| of resources and its markets is going to be a rigorous field,
| it has to start from some general principles and then explain
| how paradoxes are consistent in a general framework of
| limited resources and unlimited wants. Otherwise it's not a
| serious discipline, just ideologues playing with SPSS on data
| sources of quality we can only guess at.
|
| If there building more houses does not lead to an easing of
| prices on houses, then we deserve an explanation and a
| rigorous confirmation, not speculation.
| DrillShopper wrote:
| > why if I increase supply does price not come down?
|
| Over what window?
|
| There's clearly already a pent up demand for housing due to it
| currently being unaffordable. There's also clearly already a
| demand for speculative investment real estate, some of which is
| also pent up due to rising prices and constrained supply.
|
| If the investors are still going to be in the market at the
| current price, and they snap up all available supply, then the
| price for housing is not going to come down immediately. It
| will only come down if you increase the supply to more than the
| demand of the investors. Only then will the price come down,
| and then people who just need a place to live may engage with
| the market.
|
| The prices coming down isn't a simple on/off switch, especially
| in a market as complex as real estate.
| epistasis wrote:
| Are investors buying and keeping places vacant? There has
| always been talk of that in places like Vancouver, but I have
| not heard of that in the US. All the conspiracy theories
| about vacancies are about the for-rent new buildings, which
| doesn't make sense either.
|
| 100% agreed about there not being an on/off switch for
| pricing, real estate pricing sticks high, and it takes a
| shock to make people reevaluate what they thought there
| property was worth. The very very minor increases in supply
| when there is massive pent up demand will not alleviate
| prices much, even if it staves off price increases.
| Althuns wrote:
| Absolutely they are! We're not talking complete vacancy,
| but 10% is the bottom of what I see for new buildings in my
| midwest city. These are built less than 10 years ago, and
| several have 25+% even after all that time. It seems that
| they're willing to let vacancies happen instead of lower
| rent rates.
|
| Anecdotal obviously, but the closest one to me has been
| consistently over 50% empty due to bad construction and
| design, with no interest in fixing it to fill in the
| leaking units. Another 90 unit one has had trouble renting
| at the "luxury apartment" rates they were built to get
| because they looked landlord special day 1. They haven't
| lowered rents, only left units vacant.
| bluGill wrote:
| In some cases. Real estate is not something you can do
| hands off management of. Historic attempts to outsource
| have tended to fail because it is really easy for
| management companies to say something needs more work than
| it really does and drain all the profits. As such if you
| know a property in a different city is going to go up the
| smart things to do is buy it and leave it empty while
| paying taxes - this is cheaper than fixing the roof,
| risking bad tenants and all the other things that a long
| term investment requires. This really only works if you
| hold for only a couple years though, otherwise the
| taxes/interest will eat your profit.
|
| Note that the above limitations also limit how much can be
| invested this way. Most property won't go up by enough to
| be worth the investment costs.
| JKCalhoun wrote:
| > why if I increase supply does price not come down?
|
| We're making more and more luxury cars, why is the price not
| coming down?
|
| From looking around Omaha, I see they are primarily increasing
| the supply of high-end homes. It follows that for a given lot
| size, it's the way to get the biggest profit.
| thechao wrote:
| I know a number of builders in my neighborhood. There's a
| number of compounding issues: labor costs are higher, which
| means the customer wants to maximize resale value by
| amortizing lot costs. This dovetails (in Texas) with carried
| property tax rates; so, lots in city boundaries increase in
| price faster than you'd think just sitting around. Second,
| the builders tend to buy material on futures, which means you
| lock in price + volatility. There's been a buttload of
| volatility over the last 12 years, adding to the cost of
| materials. Inflation has hit building materials pretty hard
| (wood, concrete, steel).
|
| Last, and this is really hard to convince some people: the
| amount of _rebuilding_ due to natural disasters has
| skyrocketed. Due to the way insurance & federal relief
| works, that work is far preferable to labor than spec work.
| This has put a huge distortion in the new build market.
| mjevans wrote:
| As a country the, US and everywhere else too, should focus
| on Disaster Resistant builds. It should be in the building
| code.
|
| High wind resistant, fire resistant. Landscaping too.
| matwood wrote:
| > should focus on Disaster Resistant builds
|
| They absolutely do. Look up all the building code changes
| post Hurricane Andrew in the 90s. Those changes spread
| through the whole southeast and have made wind almost a
| non-factor. The problem is and always will be flooding.
| My house is built above the '100 year flood' line to fit
| code which helps. The problem is either older houses or
| houses built in areas that didn't historically flood
| enough for people to consider it a risk.
| gottorf wrote:
| > Those changes spread through the whole southeast and
| have made wind almost a non-factor
|
| This is great, but ugh, I live along the Gulf Coast and
| for the life of me I don't understand why more people
| don't build with concrete (block or poured) walls,
| instead of stick-framed! Sure, you can build wood to
| withstand wind up to code, but you can't make it termite-
| proof, of which this region has an abundance.
| jaredklewis wrote:
| > We're making more and more luxury cars, why is the price
| not coming down?
|
| Because more people are buying them. If you make more and
| more of something and you can still sell all of them without
| lowering the price, it means there is still more demand for
| that thing.
|
| We've under-built housing for almost 2 decades. The long term
| demographic trend is that people are moving out of rural
| areas and into urban areas like Omaha, so the fact that there
| would be more demand for than supply for housing in Omaha is
| entirely expected.
|
| > From looking around Omaha, I see they are primarily
| increasing the supply of high-end homes. It follows that for
| a given lot size, it's the way to get the biggest profit.
|
| What you say is true, but also not a problem.
|
| When I was college I lived in an apartment in Chicago with 3
| roommates. Our apartment had a servant's quarters. The dining
| room (which we also used as a bedroom) had a metal tube with
| a bell that connected to the servant's quarters. Obviously,
| at one time this was a luxury apartment, but my share of the
| rent was only around $500. It became affordable housing.
| Today's affordable housing is yesterday's luxury apartment.
|
| Not sure the details of Omaha, but where I live in Los
| Angeles, insane building codes make it incredibly difficult
| to profitably develop affordable housing. The very nice
| apartments I lived in when I lived in Tokyo would all have
| been illegal in Los Angeles.
| zten wrote:
| > Not sure the details of Omaha, but where I live in Los
| Angeles, insane building codes make it incredibly difficult
| to profitably develop affordable housing. The very nice
| apartments I lived in when I lived in Tokyo would all have
| been illegal in Los Angeles.
|
| That's not what affordable housing is. You probably didn't
| live in affordable housing in Tokyo (edit: of course I
| could be wrong, but it's not my first guess). Yes, your
| housing was affordable. But affordable housing in US cities
| is subsidized and price capped, with income restrictions.
| ivewonyoung wrote:
| Any new housing brings down prices or stops them from growing
| up as much.
|
| https://news.ycombinator.com/item?id=37524331
| getnormality wrote:
| I understand you're making a brief comment outlining a
| position, but personally, I don't see how you can be
| satisfied with that explanation.
|
| Say I have two opportunities, one pays $200/hour and one pays
| $100/hour. But I can only do the higher-paying one for 10
| hours a week. If I have more capacity and I want to have more
| than $100k in annual income, I will work the less profitable
| job, even if it doesn't provide the maximum profit.
|
| Similarly, in the market in general, if there's demand for
| housing at a lower profit margin, and there's spare capacity
| to build it, it should happen. People don't just take the
| highest profit margin opportunities and toss the rest in the
| rubbish. So I think there has to be a deeper issue, for
| example there are costs that make the profit margin so low
| (or even negative) that the opportunity doesn't attract
| sufficient labor to build the supply.
| lotsofpulp wrote:
| > We're making more and more luxury cars, why is the price
| not coming down?
|
| I don't think this is true, especially per capita:
|
| https://www.statista.com/statistics/204208/north-america-
| veh...
|
| Also, "luxury" car is relative. An entry level car today will
| have many features from a luxury car from 20 years ago. Also,
| "luxury" brands will intentionally not make too many cars to
| maintain the brand's exclusivity. Otherwise, they would not
| be able to profit from price discrimination:
|
| https://en.wikipedia.org/wiki/Price_discrimination
|
| So price per car feature and per mile has certainly come
| down, a lot. But simultaneously, people's expectations have
| gone up.
| bluGill wrote:
| > We're making more and more luxury cars, why is the price
| not coming down?
|
| Because supply and demand are carefully watched. Manufactures
| are not just making more and more luxury cars, they carefully
| study the market and adjust supply so that their price makes
| sense. Remember all the materials, labor, engineering,
| management and other overhead sets a floor to price of a car,
| they carefully watch the numbers to make them work. They
| might be making more cars, but they are not making infinitely
| more.
| bobthepanda wrote:
| it's worth noting that the opposite, not making any higher-
| end homes, doesn't actually work to increase affordability
| either.
|
| we actually saw this when new cars became unavailable during
| the COVID supply chain crunch and then used car prices
| skyrocketed. the real estate equivalent would be literal
| tenements in New York renting at $4-5k a bedroom.
| pj_mukh wrote:
| Yes, this. Also, hate to use this argument but this simply
| doesn't match my lived experience. My rent _and_ income have
| been going up for the last 10 years and yes that means I 'm
| paying more and more for housing. However, my city rubber-
| stamped a glut of housing in one neighborhood and _as my income
| went up_ , I was able to negotiate _my rent down_.
|
| This phenomenon is a direct contradiction to the thesis of this
| paper. It is true, the people who people the glut of housing
| are currently freaking out because their margins are
| threatened. That's probably a good thing..upto a point [1].
|
| The solution seems simple: rubber-stamp, _nay_ , encourage
| developers into building gluts of housing so they demolish
| their own margins into dropping the price of housing.
|
| [1] https://oaklandside.org/2025/02/14/oakland-downtown-
| apartmen...
| epistasis wrote:
| As somebody who has been involved politically with trying to
| increase supply (unsuccessfull), so that more people could
| experience what you are, I would note that Tori experience
| does not _technically_ deny that supply is a big component of
| pricing.
|
| It just says that there has to be something more too.
|
| However, NIMBYs will use this paper inappropriately to argue
| against policies that enable your type of price drops.
| kelseyfrog wrote:
| Can you help me understand your argument. It seems to hinge
| on the idea the existence of a counter-example proves it
| wrong? I could see how this would work for a logical argument
| or a proof, but I'm finding it difficult to see how it fits
| into proving ultimately a statistical finding incorrect. I
| generally see statistics as being able to tease apart
| situations where there are counter-examples and we're looking
| at things like proportions between categories and such.
| pj_mukh wrote:
| Yea which is why I started with "hate to use this
| argument". Definitely anecdotal but the kernel of truth is
| that income and rent going up could be a correlation with a
| different causation and as many have pointed out in this
| thread the paper inadequately controls for this.
|
| This is especially dangerous now as papers can be used as
| hard truths in a misinfo driven information culture to see
| policy.
| Retric wrote:
| Markets depend on both supply and demand, and there's been a
| massive decline in the number of adults living together.
|
| So the underlying explanation is likely that your personal
| salary has basically zero impact on the housing market, once
| you make enough to cover rent you end up paying the market
| rate. What matters in terms of short term trends is the
| marginal increase or decrease in people's willingness to have
| roommates, live with their parents, etc.
|
| When times are good and more people are gainfully employed
| the demand suddenly shoots up, in a downturn people suddenly
| move in with others become homeless etc. By comparison adding
| 2% housing units just doesn't have nearly the impact it seems
| like it should.
| bluGill wrote:
| The market also depends on your wants. One house is not
| always equivalent to another. Location matters of course.
| However layout, color and other features matters (some of
| them are trivial to change some not).
|
| Adam Smith observed that when people got more money they
| tended to spend it on better housing. That observation is
| mostly true today.
| Retric wrote:
| People do get better housing, but the share of income
| spent on housing drops as wealth/incomes rise.
|
| There's just diminishing returns on adding yet another
| 100sf etc.
| tokai wrote:
| Fits with my experience. Its mainly the bank's willingness to
| loan money that drives house sales. Home buyers are some of the
| best protected groups, so its no wonder that its a speculative
| market driven mainly by available funds and not supply and
| demand.
| lazide wrote:
| Or perhaps another way of stating it - available funds largely
| determine demand.
| plantain wrote:
| I don't see how this holds. Why would more houses not get built
| if the banks were so willing to lend higher and higher amounts?
|
| Seems more to me like, because there is a shortage, the
| marginal price gets bid up to the maximum people can possibly
| pay (which is decided by the banks).
| HPsquared wrote:
| And keeping in mind dollars are a limitless, renewable
| resource.
| electriclove wrote:
| Same here. I hope we get some good comments from those who
| believe it is all about creating more affordable housing. I'm
| interested in reading their counter argument or reading if this
| changes their thinking.
| hylaride wrote:
| (Availability of and access to) Debt is definitely a driving
| factor. It grants access to a larger group of people and if
| supply can't keep up (for a variety of reasons), it'd drive it
| up prices in the short to medium term.
|
| In the postwar era, any time you saw a country ease mortgage
| lending rules, home prices would inevitably rise, which would
| inevitably be made worse by further lessening of standards to
| "expand affordability". This was the TL;DR of Canadian housing
| prices (compounded by high immigration, lack of trades people,
| and high resource costs due to at the time demand from China).
| epistasis wrote:
| Why would anybody pay any more with that extra money from the
| bank, unless there's a supply shortage?
|
| There is no leverage for sellers to demand excess new money
| unless there's a shortage.
| bryanlarsen wrote:
| This paper suffers greatly from US-centrism. There are too few
| examples of proper Austin-like YIMBY cities in the US for proper
| statistic analysis.
|
| A more world-wide search would quickly find counter-examples of
| low-wage high-price cities like Vancouver, BC.
| lazide wrote:
| Or Hong Kong, Singapore, any major Indian metro, etc.
| sidewndr46 wrote:
| "Austin-like YIMBY cities" is that a typo? Surely you meant
| NIMBY?
| skadamat wrote:
| Nah they mean YIMBY :)
|
| Austin did a great job with opening supply.
|
| https://www.reddit.com/r/yimby/comments/1cxbnq3/yimby_has_ba.
| ..
|
| https://therealdeal.com/texas/austin/2024/05/20/austin-
| forge...
|
| I went to school in Austin back in 2009 and surprisingly,
| rents for my same college apartment only grew a few % a year
| since then! Crazy
| hnthrow90348765 wrote:
| This is a paper meant to explain what is happening in US cities
| and will obviously be US-centric.
| bryanlarsen wrote:
| That'd be nice if it was possible. However it runs into the
| standard social science problem -- you can't run experiments,
| so you have to rely on natural experiments. If the natural
| experiment doesn't exist, you don't have any data and you
| can't draw conclusions.
| intended wrote:
| This is why research papers are not for the lay person,
| they are for the people who have the level of training to
| understand the nuances and make accommodations for it.
|
| It's a bit unfortunate that the democratization of
| knowledge, means that everyone is expected to read an NBER
| paper.
|
| I think twice when I come across one, since it means a very
| large amount of time and calories are going to go into
| understanding it.
| lazide wrote:
| I think the point that the person you are responding to
| was trying to make is different - there is no way to
| actually test any of this, so it could just be all
| bullshit and no one could really tell.
| plantain wrote:
| Income determines house prices _because_ there is not enough
| supply.
|
| Without enough supply, what stock is available gets bid up to the
| maximum people can pay (largely decided by banks).
|
| This is like a basic cornerstone of economics!
| dbspin wrote:
| This would be true were private equity not buying up housing
| stock. That being the case income is now to some extent
| detached from housing prices.
|
| [1] https://www.washingtontimes.com/news/2024/mar/15/in-
| shift-44...
| mtoner23 wrote:
| private equity is no different than any other buyer in a
| diverse market of buyers here. it sounds bad but they are
| just bidding like any other buyer
| epistasis wrote:
| This is of course true, and the extreme aversion to private
| equity buying houses versus any other investor such as a
| person buying a second house to rent out, has puzzled me.
|
| Those small time landlords have been the worst landlords I
| have ever had. Give me a large corporate landlord which
| knows that laws exist and at least tries to follow them
| over the greedy, ignorant, and desperate small-time
| landlord any day.
| dbspin wrote:
| As someone who has lived in both, I can't agree. The
| small time landlords have differed between incredibly
| kind and deeply unreasonable, but they've all charged
| under market and responded to issues with their
| properties in a timely way. I've hit brick walls even
| attempting to contact owners / get building management to
| respond with institutional ownership. Both your
| experience and mine however are anecdotal and while
| persuasive to us individually, don't evidence the issue
| one way or another.
| rafram wrote:
| This story (as I said in a reply to the parent comment) is
| bunk, but institutional buyers _do_ have a significant
| advantage over regular people in the form of access to
| cash. You have to get a real estate agent, find a bank that
| will lend to you, get your financial info together,
| probably have an in-person meeting, hope you get approved
| for a mortgage, and finally close the sale. Some junior
| trader at Blackstone can just wire the full cash price of
| the home and have the paperwork signed the same day.
| dbspin wrote:
| They're not constrained by income as an ordinary purchaser
| would be. So they're not at all like an ordinary buyer.
| Further, if private equity buys to rent at scale they can
| fundamentally alter the availability and pricing of housing
| in a market. These firms effectively collude to raise home
| prices.
|
| Investors and Housing Affordability FEDERAL RESERVE BANK OF
| ST. LOUIS (2020) https://s3.amazonaws.com/real.stlouisfed.o
| rg/wp/2020/2020-04...
|
| Relationship between rents in NYC and ownership
| concentration
| https://www.cesifo.org/DocDL/cesifo1_wp8864.pdf
|
| Consolidation of rental market bt private investment firms
| https://journals.sagepub.com/doi/10.1177/0308518X221135612
|
| The Impact of Institutional Investors on Homeownership and
| Neighborhood Access
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4554831
|
| Algorithmic collusion in the housing market
| https://apnews.com/article/algorithm-corporate-rent-
| housing-...
| rafram wrote:
| Washington Times is not a reliable source, and that 44% claim
| has been thoroughly debunked:
| https://www.housingwire.com/articles/no-wall-street-
| investor...
| Workaccount2 wrote:
| I'm so tired of people parroting this argument as if removing
| PE would solve the housing crisis. PE bought something like
| ~15% of new homes in 2024 (using the metric "flipped" is just
| a dumb way to get a headline), which turned around mean 85%
| of new homes were purchased by regular people.
|
| But even that doesn't matter. Because PE is just investors,
| and guess what, _the regular people buying the other 85% are
| investors too_.
|
| I live in an area where there is almost zero PE owned homes,
| and guess what, home prices are still exploding. There are
| still bidding wars and still crunchy moms chaining themselves
| to dilapidated warehouses to stop new builds from going up.
| dbspin wrote:
| Comparing individual investors to managed funds isn't
| useful. The amounts involved, methodologies employed for
| return and potential for collusion aren't comparable. I
| can't speak to your market, but here in Ireland private
| equity (or vulture funds as they're known) have purchased
| 46% of new homes since 2017 [1], which has enormously
| heated up the housing market.
|
| The fact that the housing crisis is global evidences the
| impact of private equity - especially purchase to rent and
| purchase to hold. Regardless of the demographics of a given
| country we have simultaneous house price explosions
| transnationally, which are detached from wage increases.
|
| [1] https://www.businesspost.ie/news/revealed-how-many-
| apartment...
| absolutelastone wrote:
| The useful distinction is between speculators and
| homeowners. The distinction between private equity and
| individual speculators is not so useful. The latter also
| collude and vote in their investment interest.
|
| Personally I think what has been happening globally is
| that members of governments have been learning
| collectively how to manipulate the housing market. It
| seems like a win-win situation that makes (almost)
| everyone happy. Except of course for renters. They will
| push on whatever levers they have until it breaks again.
| Analemma_ wrote:
| These companies literally say in their SEC filings that "this
| is profitable only because municipalities artificially
| restrict supply; allowing more housing to be built would be a
| material threat to our business":
|
| "We operate in markets with strong demand drivers, _high
| barriers to entry_ , and high rent growth potential,
| primarily in the Western United States, Florida, and the
| Southeast United States." [0] (emphasis mine)
|
| "The continuing development of apartment buildings and
| condominium units in many of our target markets increases the
| supply of housing and exacerbates competition for tenants."
| [1]
|
| You have the power to wallop the private equity housing buyup
| strategy by building more houses! Building fewer in order to
| spite them is literally giving them exactly what they want.
|
| [0]: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001687229/a15
| 4763...
|
| [1]: https://www.sec.gov/Archives/edgar/data/1562401/00011931
| 2513...
| graemep wrote:
| Income. Incomes determine the repayments people can afford, and
| interest rates (together with term and regulator requirements)
| determine how much can borrowed that can be paid back with
| those repayments.
| Earw0rm wrote:
| It's a positional good, in effect there can never be "enough"
| supply. Short of a socialist/communist system, people will
| always compete for the best, using whatever resources they can
| bring to bear.
| mjevans wrote:
| For the Best? Yeah, that's still in competition now among
| places for the 1%...
|
| For the median and low end? There's enough when people have a
| _real_ choice of moving to a unit house or apartment a mile
| away and leaving a bad option UN-SOLD on the market.
|
| Sufficient means there's slack in the market, so the free
| market works.
| no_wizard wrote:
| Land Value Tax creates what would otherwise be a market
| pressure dynamic to sell. Since real estate isn't a normal
| (nor decidedly functional) marketplace - because you can't
| simply make new land in any realistic quantity - it comes as
| close as it can to creating a situation that increases
| utilization and decreases inefficient use of land.
|
| The incentives under an LVT system run in the opposite
| direction of what they do now.
| mitthrowaway2 wrote:
| I don't know about this. If I were the median family and
| supply was sufficient that I had 4 bedrooms, a garden,
| storage, EV parking and a workshop space, biking distance
| from my workplace, I think I'd invest the rest of my
| resources into enjoying those things rather than spending
| them on bidding for an even bigger and better home.
| closeparen wrote:
| Sure but the objective characteristics of the housing you're
| competing for, at whatever level of resources you can bring
| to bear, can be dramatically better or worse depending on
| supply.
| s_dev wrote:
| >This is like a basic cornerstone of economics!
|
| You can reduce demand by limiting speculative investors and
| that doesn't involve increasing supply.
| plantain wrote:
| Speculative investors aren't removing the house from the
| market, they're renting it out. Houses produce Housing. Sure,
| some people specifically _want_ to buy Houses, but all of us
| _need_ Housing.
|
| (I do completely agree we should get speculation out of the
| housing market - housing as a memecoin, buying because line-
| go-up is not healthy)
| matwood wrote:
| It should also be noted that housing is super local. Building a
| bunch of new supply in the mid-west isn't going to lower the
| prices along the southeast coast. And for a less extreme case,
| adding a new house across town from me isn't likely to impact
| my house's price at all.
|
| What would impact pricing is if people left an area (look at
| the 1 euro houses in Italy in towns where everyone has left).
| The mass migration to the US coasts and south doesn't seem like
| it's stopping anytime soon which will continue to put pressure
| on the local housing supplies.
| derbOac wrote:
| This paper was discussed in another forum, and people raised
| that point.
|
| However, it was also pointed out that this paper isn't really
| about _supply_ , it's about supply _regulation_ and supply
| _constraints_ :
|
| "... We also use the measures of the Wharton Residential Land
| Use Regulatory Index (WRLURI) by Gyourko et al. (2008),
| generated at the MSA-level by Saiz (2010), which capture
| variation in the regulatory environment across MSAs. We
| multiply this index by minus one so that increases in the value
| indicate a less restrictive regulatory environment and so,
| ostensibly, a more elastic housing supply function."
|
| You could eliminate housing supply regulations and still have
| poor housing supply for other reasons.
| llamaimperative wrote:
| Ah, Henry George was right once again.
|
| Land Value Tax solves this.
| genpfault wrote:
| https://en.wikipedia.org/wiki/Georgism
|
| https://en.wikipedia.org/wiki/Land_value_tax
| anonfordays wrote:
| LVT encourages sprawl. States that have high property taxes
| implement some of tenants of LVT already and it hasn't solved
| anything.
| ss64 wrote:
| Why do journalists and economists never understand that it is the
| supply and demand of CREDIT which they need focus on.
| lazide wrote:
| For the same reason alcoholics can never understand the reason
| they tend to drink is as much because of the hangover, as it is
| whatever they did to start drinking.
| bildung wrote:
| Feel free to explain to explain to these economists what they
| did wrong in their paper
| intended wrote:
| This is a paper from NBER
| Der_Einzige wrote:
| I'm VERY glad to see some evidence that rebukes the
| reddit/liberal hive-mind belief that we can fix the housing
| crisis by just "doing housing first policies" or "build more" or
| "kill all NIMBYs".
|
| In general, most similar platitudes that appear like easy
| explanations for social problems are at best extraordinarily
| incomplete and are often dead wrong.
| buttercraft wrote:
| > platitudes
|
| > reddit/liberal hive-mind
|
| Do you hear yourself?
| mrangle wrote:
| Both can be true at the same time, and are:
|
| Housing costs in the US are much more complicated than consumer
| supply and demand measurements indicate
|
| The US housing supply is embarrassingly ancient, overpriced
| (especially considering condition), and deficient in volume
| (especially given quality).
|
| You don't really have an argument when $1500 gets renters
| baseboard heating in a 40+ year old building in a secondary
| city.
| lucaspm98 wrote:
| As I understand it the "liberal hive mind" believes the exact
| opposite - that some bogeyman, typically either corporations or
| foreign investors, prevent functional supply and demand
| dynamics. Therefore they don't support a free market, typically
| more right-leaning, solution of deregulation and relaxed zoning
| restrictions.
| donatj wrote:
| What determines housing prices? The seller and to a much lesser
| extent the buyer.
|
| How does the seller set the price? To what they feel is market
| price.
|
| You can flood the market with new houses all you want but if the
| construction company isn't selling at a lower price than existing
| houses in the area, and they won't be, that's not going to push
| prices down. Because it's not a traditional commodity. Beyond
| that, it's pretty much an open secret at this point that new
| construction is a lower quality house at a premium.
|
| Only a minority of people are in such a rush to sell that they
| are going to sell their house at a loss or even a perceived
| potential loss vs expected market price. Many people are willing
| to just sit and wait for the right buyer even if it takes years.
|
| The big difference between houses and a traditional commodity is
| that holding one even when you want to sell can still be a net
| positive. You can continue to live there, you can rent it out. It
| just doesn't have the same motivation to sell as a traditional
| commodity.
| naasking wrote:
| > Only a minority of people are in such a rush to sell that
| they are going to sell their house at a loss or even a
| perceived potential loss vs expected market price. Many people
| are willing to just sit and wait for the right buyer even if it
| takes years.
|
| The people wealthy enough to do this are a small enough group
| that this cannot have such an outsized effect across the whole
| market. People typically have to sell their home to afford the
| one they're moving into, so they can't just sit on it until
| they get the price they want.
| bryanlarsen wrote:
| > Many people are willing to just sit and wait for the right
| buyer even if it takes years.
|
| I think that's only a large minority. IIUC, a majority of
| sellers are motivated sellers, people that are selling because
| life circumstances are forcing them to move and sell.
|
| But even if only a small portion of sellers were motivated
| sellers, "prices are set at the margin". In other words, if
| most people aren't selling because the price is too low, the
| people who are selling are the ones that are setting the price.
| PedroBatista wrote:
| The rivers of ink and all the gymnastics we do to avoid saying
| the obvious: Houses/Real Estate has become the main asset where
| most people store/keep their wealth.
|
| It has been this way for quite a few time, the banks like it, the
| boomers love it and the local governments can't live without it.
|
| The chickens are coming home to roost on this one, and I'm
| talking about society in general not just a"correction in the
| housing market" at this point that is more or less meaningless
| when looking into the big picture.
| ThePhysicist wrote:
| Probably needs to be taken with a large grain of salt and might
| be exaggerated but I recently heard a claim
| (https://www.youtube.com/watch?v=iKdtyDnGM-o) that the FHA
| program basically prevents a large number of foreclosures from
| happening as the government effectively keeps paying for loans
| where borrowers are already in default, and without the program
| many homes would be on the market again suppressing prices. If my
| understanding is correct the home owners get the interest
| payments made by the government tacked onto their mortgage so
| once they would go into default they would be faced with a home
| that is not worth enough to pay off the mortgage due to
| previously inflated market prices and all the added interest
| payments. Not sure if we have a new subprime crisis in the making
| here, it seems unhealthy in any case. But then again, never
| believe stuff influencers tell you on Youtube, so I take it with
| a healthy dose of skepticism.
| JohnFen wrote:
| > without the program many homes would be on the market again
| suppressing prices.
|
| At the same time, though, the people who lost those homes will
| be on the market looking for a different place to live,
| increasing demand.
|
| This is not my field of expertise, but on the surface it
| appears to me that this kind of thing is a wash. A housing unit
| is made available, increasing supply, at the same time as a new
| demand is created for a housing unit, decreasing supply.
| recursive wrote:
| > people who lost those homes will be on the market looking
| for a different place to live
|
| At a lower price point obviously. There's still a net
| movement to lower prices.
| tbrownaw wrote:
| Subsidies do raise the demand curve for whatever's being
| subsidized.
| ibejoeb wrote:
| >our findings imply that constrained housing supply is relatively
| unimportant in explaining differences in rising house prices
|
| I guess it's something worth investigating, but is anyone really
| under the impression that this is a simple supply and demand
| system? We have algorithmic pricing all over the housing markets,
| and there is an artificial floor on prices. (Check out the
| realpage actions for a glimpse into this stuff.)
| duxup wrote:
| I can't say I understand this paper / I'm not very good at
| reading these kinds of papers.
|
| I will say that in my area the municipality has had to set
| development rules for various price ranges for houses ...
| otherwise all we would seem to get are developers who want to
| sell luxury houses. Obviously there is some demand for those
| luxury houses, but the incentives to build "starter houses" or
| even affordable apartments just did not seem to be there unless
| encouraged / required by government.
|
| Once required we had a lot of WAY more affordable and seemingly
| appropriate housing being built. Still subject market forces, but
| at least there were choices now.
|
| It seems to me the margins on luxury / larger homes makes
| building luxury homes far more desirable than more affordable
| homes, even with demand for more affordable options.
| JohnFen wrote:
| > all we would seem to get are developers who want to sell
| luxury houses
|
| This is how it is in my part of the US. Not so much houses as
| large luxury apartment buildings aimed at the wealthy (and
| being built with taxpayer subsidies). They are doing nothing to
| address the very real housing shortage.
| bryanlarsen wrote:
| AFAICT, in my metro and others, pretty much all the cheap
| housing is luxury housing from ~100 years ago. Cheap housing
| built 100 years ago has been torn down and replaced, but the
| good stuff built 100 years ago is still standing and being
| used.
|
| The problem is that we weren't building luxury apartments 50
| years ago, it was all single family housing. So there aren't
| any luxury apartments that can degrade into cheap housing.
| Building luxury apartments & condos now will help the cheap
| housing situation in 50 years time.
| Cheer2171 wrote:
| This is the second biggest piece of economics misinformation,
| behind people who believe their net income will go down if
| they get a raise into the next tax bracket.
|
| Just like cars, all new housing is luxury. No one working
| minimum wage can afford the cheapest new car on the lot. But
| those new cars get bought by people who sell their used cars.
| JohnFen wrote:
| Yes, I understand this argument and it makes some logical
| sense. The issue is that when it comes to housing, it
| doesn't seem to be happening, at least not on the time
| scale of a couple of decades. Affordable housing is not
| increasing, and that's where the need actually is.
| culi wrote:
| What's considered a "luxury" apartment in Bay Area is
| considered normal in many other parts of the country. I've
| heard it's mostly a scheme to avoid certain regulations but I
| can't find anything from a quick lookup. Regardless, while
| searching for an apartment recently, the term "luxury" was
| completely meaningless. I found luxury apartments that were
| cheaper and/or had less amenities/features than "affordable"
| ones. The biggest factor seems (often slight) differences in
| location rather than differences in the quality of the
| apartment itself
| JohnFen wrote:
| I'm not in the bay area, and I'm defining "luxury" by price
| point, not amenities or features. I should have used the
| term "luxury priced".
| Analemma_ wrote:
| "Developers are only building luxury houses!" is a symptom of
| supply being forcibly prevented from meeting demand. An
| unrestricted market on housing will build houses up and down
| the price spectrum. Now introduce an arbitrary cap on the
| number of houses which can be built. Which houses are the ones
| that get built? Obviously it will be the ones at the top of the
| spectrum: they are the most profitable, so that demand gets met
| first until it is either fulfilled or developers can't build
| anymore.
|
| Consider, if a car company was only allowed to build 100 cars
| per year, of course they would build only million-dollar
| hypercars. In order to profitably meet demand at the bottom end
| of the market, they need to be allowed to supply in large
| quantities.
| duxup wrote:
| Isn't housing inherently limited by space, city's ability to
| plan / permit, and setup / install services?
|
| Even housing builders seem limited in their ability to build.
|
| I'm not sure an "unrestricted" market is a realistic or even
| desirable concept here.
| hnthrow90348765 wrote:
| >An unrestricted market on housing will build houses up and
| down the price spectrum.
|
| I don't know, it would seem land costs would make up a higher
| proportion of the total cost of small low-cost individual
| houses, and if that's true then you'll need to buy a lot more
| land and start running into people who won't sell or quote
| ridiculous land prices, which makes those builds unfeasible.
|
| My guess would be they'd still go for bulk, high density
| builds for low cost housing. The biggest issue there is that
| those are almost always apartment rentals which don't build
| wealth, which leads to less buying power further along in
| life, and that hurts demand for medium individual homes.
| cloverich wrote:
| But to be clear homes only build wealth because they go up
| in price over time right? And this is due to the limited
| supply of housing in particular relative to our population.
| Previously, I had always assumed if mortgage payments and
| rent were comparable, then you'd come out ahead buying. But
| you need a down payment, and you need to borrow money to
| finance the home. So the real comparison is rent + no
| borrowed money + investing your down payment instead. Every
| calculator I use to do that, its very difficult to end up
| with more wealth buying than renting. UNLESS the home price
| goes up significantly after you purchase.
| ajkjk wrote:
| I always felt like this was kind of obvious. People love to say
| housing supply will lower prices, and it's probably slightly
| true, but it's fairly clear that house prices go up in places
| that people _have money_ , and they go up proportional to the
| money. In the US the rich have comically more money than the poor
| --100s or 1000s of times as much, comparing the surplus that a
| wealthy tech employee has to put towards a house fund compared to
| a person living paycheck to paycheck. And then the rich will then
| buy vacation homes, pied-a-terres, etc, with their huge excess.
| Who would put money into building for people who have no money
| when those people are out there?
|
| Rent on the other hand is likely more supply/demand based because
| it is actually possible to have empty units due to overbuilding
| if the local economy shifts. But even still they are motivated to
| hold units empty and keep the price high to wait for a rich
| person who can afford it to come along. (Not to mention
| algorithmically colluding so as to not actually compete on
| price.)
|
| I cannot imagine how housing could ever become more affordable
| for the poor unless the income disparity lowers, short of some
| sort of price-fixing governmental action.
| jaredklewis wrote:
| > short of some sort of price-fixing governmental action. Well
| rent control has a long, well documented history of bad
| outcomes. Doesn't exactly make me eager to let the government
| set all the prices.
|
| I think a sufficiently high land value tax would either
| discourage excess housing speculation by the rich, or raise
| enough revenue to support wealth redistribution schemes that
| erode what you identify as being the cause of the issue.
| verteu wrote:
| Really? https://i.imgur.com/BMsPrKY.png
|
| Seems to correlate pretty well to me. Per [1] and [2], YoY home
| prices are decreasing in most regions with high % change in
| homes built ("New housing units authorized per 1k existing
| (2021)"), eg: Austin, Jacksonville, Houston, Phoenix,
| Nashville, Phoenix, Raleigh.
|
| [1] https://constructioncoverage.com/research/cities-
| investing-m...
|
| [2] https://www.zillow.com/home-values/10221/austin-tx/#/
| closeparen wrote:
| The 95th percentile household income in the Bay Area is $250k.
| That corresponds to a house around $1.2 million: well below the
| median. Your relative position in a housing market that's
| outpacing inflation is mostly based on when you got in, not
| your relative income.
| aeblyve wrote:
| Households with two PMC-type spouses earning PMC-type salaries
| with generational wealth, set prices in US cities. Preference for
| cash buyers, as well as buyers that waive inspection (they can
| afford to), often get precedence in bidding, making the value of
| cash over credit higher.
| etrautmann wrote:
| what is PMC?
| aeblyve wrote:
| "Professional Managerial Class".
| yonran wrote:
| It's surprising that they took measurements at 2000 and 2020 and
| did not mention the Great Recession at all, which severely
| reduced ability of households to get a mortgage and disrupted
| both demand and supply. I don't think their attempt to control
| for the "kinked" supply curve by dropping the bottom 25% of
| metros by income growth is sufficient to eliminate metros that
| were devastated by the Great Recession.
|
| Also, I am not sure whether comparing to median value of
| constraint index (e.g. Wharton residential land use regulation
| index) is a particularly good way to categorizing metros into
| constrained and unconstrained, since it's hard to know which
| specific constraints of the "regulatory hydra" are important for
| future development (https://twitter.com/TheJakeSchmidt/status/157
| 220787234744729...). One metro may need to reduce minimum lot
| sizes to allow the next increment of development, whereas another
| metro may need to allow lot mergers and relax density limits
| instead.
|
| So I think this paper is basically concluding that land use
| constraints are harder to measure than income growth.
| epistasis wrote:
| There are many many many flaws with the correlative analysis of
| this paper, and the flaw you have identified is an absolutely
| key flaw.
|
| Here's a great Odd Lots podcast on that specific issue:
| https://www.bloomberg.com/news/audio/2025-03-13/odd-lots-is-...
|
| It's also interesting to note that the guest identifies lack of
| supply as the other key thing to fix, but finds that the idea
| that YIMBY policies could actually be put in place too
| politically infeasible to consider.
| yonran wrote:
| Yes, Kevin Erdmann's writings were what I was thinking of
| when I said that lending has been restricted since the Great
| Recession. He does identify "Closed Access" supply
| restrictions as the original sin that the Fed misinterpreted
| as a speculative bubble. I highly recommend his blog and
| books.
| dogline wrote:
| As somebody who lived in Northern California in the communities
| which first started spiking in the early 2000's, I've always had
| a pet theory from the time.
|
| Housing Appraisers realized they could tack on $10k per house
| when appraising, _and they realized that nobody would stop them_.
| Realtors loved that because they got more commission, buyers
| realized that houses were going up fast so they 'd better get in
| while they could, appraisers got called back more in a tight
| market and everybody made money. There were *no* controls on the
| appraising.
| to11mtm wrote:
| Ding ding ding!
|
| Still remember how when I bought my house, there was a clause
| for 'if the house appraises under X, buyer will pay up to Y out
| of pocket to match the difference' (This was to help make the
| offer 'stronger' according to realtor.)
|
| Lo and behold, my house magically appraised exactly for X,
| despite it likely being more like X-5,000 based on realities
| and other sales in the area...
| nine_zeros wrote:
| Yes, appraisers make their best effort to make the sale happen
| - because that is what their payers (banks) want. All they need
| is plausible valuation.
| rco8786 wrote:
| At least in my state there is no incentive for appraisers to do
| this. 99% of appraisals get assigned to random appraisers.
| There is no such thing as "repeat business", at least within
| the realm of your typical home sale where the buyer is
| financing through a bank.
| dogline wrote:
| In California, at least at the time, Realtors called the
| Appraisers they knew could be a little generous with the
| numbers to make the clients happy. Speed-dial. Inflated
| numbers were easy to make plausible, and as time went on, the
| cycle became self fulfilling.
|
| Appraisers knew this, they got lots of easy business for an
| afternoon's worth of work, and grew their businesses.
| Realtors would shrug and say "That's what it appraised at."
| Banks were happy. Sellers were happy. Lots of money. There
| was no natural regulation or push-back stopping any of this.
|
| Source: friend made lots of money doing this at the time.
| They probably made out better than the Realtors.
| julienb_sea wrote:
| I mean this is true, but I think its more realistically like
| the appraiser doesn't want to create a situation where it tanks
| a sale if they can avoid it. When I bought my house in 2022
| there was a bidding war (like every house sale in Seattle), I
| paid 150k over asking price which was relatively speaking
| pretty reasonable as the other houses I bid on went for 250-500
| over.
|
| That said it was on the very high side of valuation. My agent
| told me if the first appraisal wasn't enough to cover the
| purchase price, we would just get another appraisal. The first
| appraisal went fine, compared to other properties it was within
| range of reasonable so they approved it and the mortgage went
| through without issue.
| driverdan wrote:
| Unless the houses were sold monthly adding $10k would be below
| the rate of inflation and have no impact.
| no_wizard wrote:
| Residential zoning laws in most California cities (and frankly,
| across the country) do no favors either. They're tuned tightly
| to encourage home values to go up not to stabilize the cost of
| housing and maximize housing accessibility.
|
| This strictness is the backbone of what allows everything else
| to happen. There's no market dynamic - because cities (or more
| specifically, city residents) don't seemingly actually want a
| functional real estate market for a variety of reasons -
| therefore there is no way for enterprising developer to come in
| and build and sell at a price target they look to set.
|
| Instead, it all has to go through this machinery as you
| describe. It has always been ripe for exploitation as a result.
| adamredwoods wrote:
| Taxes are suppose to keep this from going out of control. but
| the only way to appeal a tax appraisal increase (here in
| Washington) is to use OTHER home values in the area that are
| similar, but less.
| lsllc wrote:
| Mortgage appraisals are far higher than the local tax
| appraisals which seem to run 20-25% lower than say Zillow
| says. Local tax appraisals are also typically only updated
| once every 10 years or so (depending on the jurisdiction).
|
| Besides, I think these days the appraisers don't actually do
| appraisals, they just look at Zillow.
| timewizard wrote:
| No income no job loans.
|
| That's _why_ the appraisers could do this.
|
| The banks got greedy, realized their mistake, and then promptly
| blew up the market on purpose. The secondary effects were not
| the drivers of the crisis. This is one of the most documented
| and unpunished crimes of the century.
| jfengel wrote:
| The best part: it may well not have been illegal. The economy
| is a constant cycle of upswings caused by new forms of crime,
| followed by a crash and then new laws. They then set out to
| research new forms of crime.
| laweijfmvo wrote:
| why does this sound like what the credit agencies were doing
| during the subprime crisis?
| wat10000 wrote:
| Appraisers don't set prices, though. In my purchases and sales,
| they've only been involved after an offer is accepted and the
| lender wants to be sure that their collateral is worth what it
| needs to be. Even if some people are using appraisers to set
| their asking price, that doesn't mean buyers will offer it.
| mgkimsal wrote:
| The network effect of the prices going up seems to permit the
| appraisers to add their bumps up as well. I don't think it's
| as influenced by appraisers as some think, and it might vary
| by region a bit. If prices in a region are rising (for a
| number of factors) I don't think many appraisers are going to
| round down in their judgements.
| jlhawn wrote:
| This paper primarily considers house prices and quantities in
| terms of single-family homes. They use data sources like the
| single-family repeat-sales index and the median home value from
| the American Community Survey, which mostly tracks single-family
| homes.
|
| This focus limits their analysis by not fully accounting for
| multi-family housing units or rental markets, which are far more
| significantly impacted by supply constraints.
|
| This emphasis on single-family homes in their data sources
| affects the generalizability of their conclusions about the
| impact of supply constraints across different types of housing
| markets, especially in dense urban areas where multi-family units
| and rentals are more prevalent.
|
| They also only go as far back as 1980. The difference between
| supply constraints between 1980 and 2025 is very small compared
| to the difference between 1965 and 1980. Take Los Angeles as an
| example [1]. The zoned capacity of many metro areas was
| dramatically reduced by the mid 1970s.
|
| [1] https://www.lewis.ucla.edu/wp-
| content/uploads/sites/17/2020/...
| no_wizard wrote:
| I also don't see a detailed run down in the paper of zoning
| laws and other local regulations and how that contributes to
| cost. They looked at a lot of top level numbers (from what I
| could tell) without diving into the specifics.
|
| Zoning laws while not completely uniform, do seem to follow
| patterns across the country. The long and short of it is, the
| more desirable some place is to live, the more restrictive
| zoning laws and harder it is to get approval for builds and it
| depresses housing inventory over time.
| cycomanic wrote:
| > This emphasis on single-family homes in their data sources
| affects the generalizability of their conclusions about the
| impact of supply constraints across different types of housing
| markets, especially in dense urban areas where multi-family
| units and rentals are more prevalent.
|
| But that's what people are typically complaining the most
| about, so fair enough that they focus on it.
|
| > They also only go as far back as 1980. The difference between
| supply constraints between 1980 and 2025 is very small compared
| to the difference between 1965 and 1980. Take Los Angeles as an
| example [1]. The zoned capacity of many metro areas was
| dramatically reduced by the mid 1970s.
|
| That' supports their point though, if the supply constraints
| differences have been small between 1980 and 2025, but the
| house price increase has been large, then supply constrains
| can't really explain house price increase? Or am I
| misunderstanding your point?
| h0l0cube wrote:
| > rental markets
|
| Specifically because the paper is about house price, not rental
| price. For most people, the issue of achievable secure home
| ownership is different to rental affordability.
|
| > multi-family housing units
|
| Not really the kind of place that most people want to buy to
| live in for the remainder of their lives (unless starved of
| options).
| oblio wrote:
| > Not really the kind of place that most people want to buy
| to live in for the remainder of their lives (unless starved
| of options).
|
| This is such a true, yet sad, reflection of American society.
| manishsharan wrote:
| >>Not really the kind of place that most people want to buy
| to live in for the remainder of their lives
|
| That is purely subjective. I would rather live in a condo in
| Manhattan than a single family home in Long Island.
| frollogaston wrote:
| This is what I've been saying for years. The valuable part is the
| desirable land, which can't be built like a house. Also the rent
| and value are pretty disconnected.
| postalrat wrote:
| You know why housing is so expensive? It's because building a
| house is so expensive. If it wasn't people would be building
| houses left and right in the many thousands of empty lots
| scattered throughout the country.
| anonym29 wrote:
| " _Inflation is always and everywhere a monetary phenomenon, in
| the sense that it is and can be produced only by a more rapid
| increase in the quantity of money than in output._ "
|
| - Milton Friedman
|
| One need look no further than the correlation between M2 growth
| and house prices to see this in action.
|
| For the Keynesians and MMTers in the room, downvote me if you
| must, but please read this before you do:
| https://www.econovis.net/post/house-price-vs-money-supply-in...
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