What happens when housing prices go down?
337 comments
·July 21, 2025rwarfield
andrewmutz
It is indeed a mess. It's full of strawmen, like:
> Price Drops Don’t Lead to Supply. They Kill It.
No one believes price drops cause an increase in supply. They believe an increase in supply causes price drops.
> If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals.
People believe that increasing supply will lower prices, not "stabilize the system". The current system is plenty stable, and thats the problem.
ch4s3
Right clearly, as supply meets demand and prices stabilize or start to drop, new supply will slow down. You can easily have scenarios where lots of supply is being built at once and outruns demand by a lot and causes a short term drop in prices, but that still won't cause supply to drop.
I think arguments like the one in the article have over-learned the lesson of 2008. Yes the financial crash in 2008 wiped out so many home builders that capacity to create supply was lowered. But that's not the sort of event that is caused by high supply.
creer
This discussion so far ignores cost. That's a problem.
And cost has to do with intensity of effort. In the case of construction, if there is less construction going on, then there is ("all other things being equal") more personnel available: so less delays and less hourly cost. If there is less construction going on, there is also less pressure on materials suppliers, so less expensive lumber, concrete, etc. So that it's easier to make a profit. So that it might make sense to build lower value housing. While when construction is booming, there is extra less incentive to build lower value housing.
Of course, if land availability is artificially constrained, then there is never much reason to build lower value housing. The profit is elsewhere.
tacticalturtle
As soon as I saw it was the founder of Strong Towns it all made sense.
Strong Towns, Not Just Bikes, and all those content creators are fulfilling the “hobby” of city planning (ie, watching hours of city planning YouTube videos, but never actually organizing at a local level)
This is a really great video about one man’s experience with trying to improve his community, getting involved in local government, and his criticism that the city planning YouTubers always gloss over what this actually looks like - they just point out what we’re doing wrong.
https://youtu.be/bUs0ecnbOdo?si=8dVweyWfvIF5ddg-
So I think that’s why the logic doesn’t make sense. It’s not meant to be actionable. It’s meant to be easily digestible so that people participating in the hobby can feel enlightened.
Rendello
Strong Towns is "not meant to be actionable"? The whole modus operandi of ST is bottom-up change from local chapters of advocates who organize for change at the local level [1]. The organization develops things like the Crash Analysis Studio, which is a structured model for local citizens and municipalities to respond to car crashes in a similar way to aircraft crashes, and redesign streets to prevent further deaths [2]. Here's a panel for a city I lived in, Ottawa [3].
As for NJB, he's abrasive and I don't agree with everything he says or how he says it, but he does talk a lot about his past advocacy work with the local government on Toronto. He encourages action, but I don't understand what he's supposed to do here, make videos for specific local advocacy of every large city in the world?
1. https://www.strongtowns.org/local
Bukhmanizer
I don’t think this tracks for me. Sure urbanist YouTube doesn’t really talk about local politics, but an extremely high percentage of people interested in city planning that I know have started doing something to influence local policy. One of my coworkers ran for city council recently. It turns out that people who are interested in watching multiple hour videos on the specific widths of roads are also not that bored by the ins and outs of local politics.
mcv
Is your argument that what Strong Towns and NJB are doing is somehow invalid because they're not also doing something completely different? Raising awareness is also a very important role. Sure, maybe 5 friends can get you elected to a local office, but first you need to convince those 5 friends. You need to get people to care.
Of course organizing is important, but so is awareness, and that's certainly what NJB is all about (I'm less familiar with Strong Towns). And organizing is especially unimportant to NJB, because he already lives in a country where this stuff is better organized than he'd ever been able to come up with. He's just spreading the good word and showing the contrast with North America. And he's very effective at that.
The witty snarky videos about organizing are better made by people who know more about organizing. If you think they're not emphasizing the thing you think is most necessary, why aren't you out there doing that?
OldfieldFund
HackerNews folks are getting hooked on ragebait recently
shredprez
I dunno about that, the HN community has had a curmudgeonly streak as long as I've been a part of it (~15 years). Not exclusively, but... persistently!
scoofy
This is all based on a long and relatively technical book they published last year:
Escaping the Housing Trap: The Strong Town Response to the Housing Crisis.
alexb_
What? Strong Towns is not just their "content creation", they ARE local organizations. You might have a chapter in your city. This criticism tells me that you don't know what Strong Towns is, what they do, the actual specific policy guidelines they come up with and push that have real influence on local city planning.
Strong Towns gives actionable proposals all the time, and their main purpose is local organizations to actually do local change. To accuse them of being a content creation scheme that does no organizing tells me that you have not looked into this at all and are making immediate assumptions based on the aesthetics of their content.
davidw
On balance, I think Strong Towns has done a lot of good, but in terms of organizing on the ground, I think the two large YIMBY organizations are better at equipping people to make change in their communities:
* https://welcomingneighbors.us/
I happily read and share a lot of Strong Towns content - they do put out a lot of good stuff despite the occasional dud. But in terms of learning how to show up and get things done, I think that's not their strongest spot.
tacticalturtle
Yeah I think my original comment was too cynical and misplaced when lumping in all of the Strong Towns organization with Not Just Bikes style content. I’ll read through what they have today.
Admittedly my experience might be colored by the fact that they don’t seem to have much of a presence in my home town of Boston - it’s more other groups like the Cyclist Union showing up at meetings carrying forward things like bike lane advocacy, etc.
doctorpangloss
i'm not sure why you are being downvoted, but the people you are talking to are the reason "It's all projection" is true.
bluGill
Also no discussion of interest rates - I bought my house just a few years ago at just under 3%, today I would be paying more than 6% - I couldn't afford the payments if I refinanced. I believe that interest rates are the primary driver of less construction: people who want to buy can't afford to unless they downsize.
andsoitis
> I bought my house just a few years ago at just under 3%, today I would be paying more than 6%
Yes, the cost of money (interest) was cheaper a few years ago. But the cost of money has gone up, primarily because central banks are also managing inflation by making borrowing more expensive.
null
scotty79
But you need higher interest rates to offset the risk if your collateral might not appreciate.
kjkjadksj
3% change really breaks your budget? Higher rates generally mean lower home prices anyhow making the effective mortgage rate more similar than anticipated.
bluGill
Percentages don't work like this. It isn't a 3% change in rate, it is a doubling of the rate, and that will break the budget. You can find mortgage calculators to run whatever numbers you want, but it is hard to find any realistic scenario where it is less than $500/month, and for many over $1000/month. That amount of money will break any budget.
I expect home prices to go down long term if interest rates remain as they are. However home prices are a lagging indicator and so it will take years for the interest rate changes to cause that change. (and over those years other things will happen meaning we will never be able to figure out how much change is because of rates and how much because of other factors)
iJohnDoe
6%-%7 is crazy high at today’s high home prices. Yes, it’s accurate that someone couldn’t afford their current house at today’s interest rates.
Today’s interest easily shave off about $100k+ in what people can afford.
People won’t sell because they can’t afford to move anywhere unless they take their equity out of state to a lower cost of living.
People not selling means lower inventory. Only desperate people will buy now because they have no choice (relocation etc.)
Raising interest rates is the easiest way to fuck things up. We’re in this for the next 5-6 years.
gedy
> Higher rates generally mean lower home prices
It hasn't so far, though yes it should and eventually will imho.
People I know tend to get ass in deep with debt will little room for error, and doubling interest on a mortgage would certainly push many over the edge of "affordability"
Der_Einzige
The whole point of high interest rates is to get your economy unaddicted to cheap money and force economic efficiency.
This is why Trump is so angry about high interest rates and has threatened to fire powell again and again over it.
bluGill
I would not call 6% high - I'd call it normal, maybe even low-normal. 3% was low, and done at a time when stimulating the economy was thought important enough to accept the consequences. However we are not facing the fallout of rates going back up.
dragonwriter
> The whole point of high interest rates is to get your economy unaddicted to cheap money and force economic efficiency.
No, the point of high interest rates is to slow inflation; its part of the Fed’s thermostatic response to changes in the employment and inflation landscape.
It’s not an swift radical ideological change from the same Fed board with largely the same members that also implemented low rates not long ago. Its changed external conditions leading to the same kind of response the Fed tends to make to the same kind of condition changes historically.
marcosdumay
Well, literally the point is to stop banks from taking as many loans and force them to keep more deposits at hand to cover withdraws.
But yeah, getting the economy unaddicted to ZIRP is a good side-effect that the US will get if they manage to keep it all the way through the withdraw phase.
B56b
The increase in supply he advocates for is a viable solution because it is sensitive to different things.
Small, local development gets built and becomes profitable based on demand of the local housing market, but almost all housing today is built by large developers. These large developers are responding to the demand not for housing, but for the mortgage itself. Thanks to nationalized mortgage securitization the buyers the market cares about are those buying these securities: banks, pension funds, insurance companies, etc. When prices fall these securities become less attractive financial products, which decreases the demand for large development.
Chuck advocates for local building, which can ignore this macro-level demand and instead respond to the actual local demand for shelter.
gota
Regarding the bit about Dallas being an example of rise & fall of prices it seems to be an issue of poorly worded (or explained) difference in time frame. I replied under another post with the details from the sources (https://news.ycombinator.com/item?id=44635228)
zozbot234
Even the title is a bit of a mess. What happens when the price of $THINGY goes down (where $THINGY is housing)? It depends. Did the price drop because of an increase in supply, a decline in demand, or both? That's what determines the overall effect (including something as basic as the change in quantity!), you can't just reason about a price change in isolation. If this article comes from the Strong Towns folks it's not making a very good argument for their POV, I'd expect way better.
bwanab
> So which is it?
It can easily be both statements are true. And a quick look at Zillow's data on Phoenix shows a huge run up in prices from 2015, but a leveling and interesting looking drop happening over the past year. The article certainly could have described this with a bit more elegance than it did.
The logic of the article is that people want more housing up to the point in which existing owners become terrified at the prospect of losing their equity and demand action. The logic is bizarre because the behavior its trying to describe is bizarre. Economy's are extremely complicated feedback loops and housing is part of the economy.
falcor84
> The author is making the classic econ 101 mistake of confusing the supply curve (which is supply as a function of price) and quantity supplied.
This seems to be just another good demonstration of Michał Kalecki's famous aphorism about how "Economics is the science of confusing Stocks with Flows".
eviks
The whole article is a mess of basic misunderstanding and conflation of cause and effect and reasoning from a price change instead of understanding what caused it.
> When prices actually go down, builders get nervous, lenders get cautious, financing dries up, and projects disappear.
No, it depends on the causes that drove the prices down. Some of those will get builders nervous, while others will make them giddy.
> New construction has collapsed not because of a lack of land, permits, or even demand but because the financial risk has become unmanageable. High interest rates, shrinking margins, labor shortages, volatile materials costs… none of these are softened by falling home prices.
They are: if you can build a house in 1 day instead of 1 year waiting for some permit, your costs of capital goes down, so it can offset some of the other costs going up. If your permit doesn't force you to limit the size/number of units, you can spread your fixed costs over more units, raising your margins, which directly softens ... shrinking margins
hattmall
Permits and licensing is a huge factor, most of the southeast didn't even have licensing boards until the late 90s. If you wanted to build a house you could just do it. Now it's functionally impossible unless you are capitalized enough to spend a considerable amount of time and money on the permitting and approvals process.
One of the reasons there's so much gentrification is that it's much easier for builders to take a falling down house and replace 99.99% of it than to get approvals for completely new construction.
msgodel
I'm just building my house myself and ignoring the permitting process. It's extremely rural and there's no one to really report the violation plus the house is so small if I'm forced to tear it down it's no big deal. The expected value of "breaking the law" this way is pretty deeply positive.
tuna74
That is great until you want to sell it.
tsunamifury
I find it funny how confidently hners criticize perceived incoherence with their textbook prognostications of how simple the models are when even the Fed and world renowned economics can’t give such confident solutions.
ecshafer
What do "Gamers" have to do with anything?
stego-tech
Ultimately, there is no solution in which the core groups will all be appeased:
* If prices keep going up, then home ownership remains a luxury of the wealthy and an exploitation of the poor. Asset holders will be thrilled with returns, but the majority struggling to get or stay on the proverbial property ladder will grow increasingly angry at sky-high rents and prices with stagnant wages
* On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate. Large home builders will cut back on builds, purchases, and labor, in an effort to push margins back up. Existing asset owners will be angry at losing (illusory/on-paper-only) money, and cut back on spending, purchases, or renovations until they see their valuations rise again. Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.
Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Higher prices on core necessities should be met with a mixture of rising wages and price controls to reflect broader economic growth or support, but neither happens because of monied interests: if wages rise, companies will outsource and the problem perpetuates, while price controls prevent asset holders from maximizing their return on investment, a sin equivalent to murder in the eyes of the propertied class.
And so we have a group who benefits from nothing changing (asset holders, mega-builders, financiers), and a group that benefits from an all new engine design built for modern problems (the working classes, smaller employers, and - increasingly - insurance companies), fighting for the next century of housing policy.
I’m hoping the latter wins, despite the pain it would cause the former. Housing is a necessity first, and an asset class last.
thinkingtoilet
>Existing asset owners will be angry at losing (illusory/on-paper-only) money
I wouldn't be. I bought my house to live in it, not as a financial vehicle. I would be thrilled if prices came down and others in my generation could afford a house because I had the dumb luck of purchasing one in 2018 before the shit hit the fan. I couldn't even afford my own house now.
stego-tech
You and I are in a growing minority on this, I find. When I started my homebuying journey four years ago, I did so expecting to eat an on-paper devaluation of up to 50% during my lifetime - and was fine with that, because I wanted stability, not profit.
s1artibartfast
That makes sense if people have more and more of their assets tied up in home value. It's a positive feedback loop.
I assume that 50% markdown wouldn't be a 50% loss on your assets or retirement.
richonpaper
We bought a house 17 years ago. We could barely afford it and struggled to keep it for years.
The house more than doubled in value in that time. Great right?
Well the kids grew up, and we sold it and bought a smaller place.
Just the tax (GST on a new build) and the realtors commission amounted to two years worth of my gross pay.
We sold our old place that had a $400,000 balance on the mortgage for $1.7 million, bought the new place for $1.2 million and now have a 175,000 mortgage.
Just the costs of the transaction are greater than what my parents paid for the last home they bought.
These sky high prices are not good for the middle class. I would be much better off if my mortgage payments for all those years were small enough to allow for retirement saving. I'm basically fucked if I want to live indoors in my town after I can't work anymore.
tracker1
Largely the same boat here, I refinanced in early 2020 near the lowest interest rates and eliminating the mortgage insurance payment. Of course since then, property taxes have gone up significantly. All said, I'm living here at a cost that I can sustain. I'd have trouble paying close to 2x the amount for a new loan of even the same total.
Way too many people got sold on the idea you could just flip a property every other year and move on/up... that kind of growth/inflation has never been sustainable in any industry ever for more than a couple years.
The closest, recent example I can think of is the cost of junk food. I no longer have it much at all, but even for calorie free soda options, the pricing seems to have more than doubled the past few years. More so than most food in general. They've maximized their profit margins and I don't think they'll be able to sustain it. People are cutting back on spending as a result.
I think the amount of mortgage defaults are as much about credit use in general as it is about the housing market. I've been unemployed 11 of the past 24 months, and currently working for about 60% of what I used to make. During that unpaid time, I built up a lot of credit card debt. Right now, it's not my mortgage that's killing me, it's the credit cart interest combined with a job that doesn't quite cover it all. I was working two jobs for a while and just couldn't keep it up. A LOT of people are in a similar boat.
Right now, I could sell my house, and just about start and 0 debt all over... but then I'm paying 2x as much for rent and not getting ahead without moving... and even with remote work, places try to pay "market" for where you live. The options are kind of crappy.
lordnacho
I think the same. I have a house, but the mortgage is not massive. If I can just live in it with no appreciation, that's fine with me. I even want to encourage building in the area, since we have a train station that seems underutilized.
There's a more selfish reason for wanting prices to not rise. I have kids. In a few years, they will be adults. If prices keep rising, how will they launch their own lives? I'll get asked to buy another house again.
itake
On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating.
I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and value, it’s very painful when there’s an unexpected repair that requires additional capital that isn’t recaptured in the home value growth.
It’s like driving a new car off the dealership parking lot and immediately getting your doors dinged. I’d feel a lot less about it if the car went up in value…
thinkingtoilet
But even if your house was worth more in value, you would still have to make those repairs and it would still come out of pocket. It only matters if you bought your house to sell it at a profit. Of course, if you hadn't bought it, you'd be paying someone else's mortgage.
epistasis
Same for me, but that's not how most people view the housing market, especially those who take the time to influence local politicians.
zozbot234
Price controls are a terrible policy. The nice things about rising housing prices is that they can be addressed in a way that also creates a nice tax base for local communities: Raise property taxes on the ground-rent portion of real estate values. For those living in California, this means you need to put an initiative on the ballot to get rid of the infamous Prop 13.
ch4s3
> On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate
A rather small part of the economy relies on high long term returns on housing. You can build homes and sell them for rather small margins and that's good business. Many types of businesses happily run on profit margins that are single digit percentages.
> Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.
In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%.
> but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.
Factually the majority of US families live in homes they own, about [65% of US families own their homes])https://fred.stlouisfed.org/series/RSAHORUSQ156S) that is not only a majority but nearly 2/3.
stego-tech
You’re cherry-picking stats without offering a counter-argument, as if they alone dismantle the whole of the argument.
> A rather small part of the economy relies on high long term returns on housing.
Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values).
It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority.
> In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%.
Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis. The fact you included second homes paints an even more distressing picture, because to have a second home means you not only have a primary home, but also the excess capital for a secondary domicile in the middle of a housing crisis.
Furthermore, those numbers - if true - are almost certainly national figures. Local ones can vary substantially, and the statistics show that affordable housing is predominantly being bought by investors for rent, not homebuyers to build equity.
> Factually the majority of US families live in homes they own, about [65% of US families own their homes])
That’s a grossly misleading statistic on its face, because it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home. It does so by hiding the average age of homebuyers (which only goes up, indicating only those on the property ladder already are buying homes in large enough numbers to drive the average upward), the types of homes being bought (what about mobile homes/trailers? Or people who live entirely on the road in RVs? Why is it “ownership” if they’re still paying a mortgage to someone? Etc, etc), and regional or local policies that affect these demographics. FRED data is awesome, don’t get me wrong, but that figure is like pulling the U-1 for unemployment and saying everything is rosy.
Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.
ch4s3
The counter argument is that your assessment is wrong and the real need here is to simply build more.
> Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values).
These parties mainly reply on home construction, renovation, or just home sales. None of those things require housing as an investment to have returns near equities. Home builders will build homes even at lower levels of price growth, as they did in earlier decades. In fact we'd see more construction but for regulation. Really only lenders and agents/brokers are taking a big hit if home prices drop. Builders would probably net out just fine because home prices and land value are so closely linked.
> It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority.
You're mistakenly quoting the total asset value of all US housing, the US has a GDP of $30tn. Home building accounted for ~$0.8tn last year. Home building, sales, and associated industries account for about 15% of GDP. Higher supply and therefor lower prices could easily net out to a similar amount while freeing up more money for other uses by consumers. The economy isn't zero-sum and high housing costs are drags on productivity in other areas. This is pretty well established.
> Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis.
You should take those numbers at face value because they come from FRED, and you can verify them. Most of the 13% who are investors are buy a single building to then rent out. Some people prefer to rent rather than buy, and some prefer to rent a house rather than an apartment. The solution to a housing crisis remains more supply.
> Local ones can vary substantially,
No one argued otherwise, but it's useful that have a macro figure as a benchmark. It also may surprise you to learn the Texas has about the 5th highest share of institutional purchasers[1] while seeing prices fall in Austin, Dallas, San Antonio, and Houston all at once. So the data doesn't align with your expectations.
> it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home.
I said no such thing. It's just roughly the norm for many years[2] and has never fallen below 62% or gone above 69%[3] for as long as stats have been kept. It's a useful stat for framing the discussion. IMHO we should be more concerned about the rent burden for the other ~30% and should build more to alleviate that problem.
>Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.
Here's the competing narrative, you're spouting populist crap about a subject where you had literally 0 grasp of the actual fact, so I gave you some of them as a start.
[1] https://www.axios.com/local/dallas/2025/02/12/investors-stil...
[2] https://fred.stlouisfed.org/series/USHOWN
[3] https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
doctorpangloss
> A rather small part of the economy relies on high long term returns on housing.
Uh, my dude, real estate is the #1 sector in the Los Angeles and San Francisco economies...
stego-tech
They’re just blindly quoting what they’ve heard instead of actually studying the data and environment to form a conclusion.
Anyone under fifty in the US who has tried to buy a home since 2019 knows first-hand what the situation is right now, at least in their area. Those of us who have been “in the game” longer see these same patterns repeating elsewhere, suggesting the issue isn’t local regulations so much as a fundamentally systemic problem with how housing is treated in America.
ch4s3
It accounts for about 15% of GDP, and like other sectors you can sell more units for fewer dollars and still make the same amount of money while providing more value to your consumer. High housing costs drag on the economy.
sokoloff
Price controls work to ensure scarcity.
Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.
doctorpangloss
a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.
jstimpfle
Funny that GP whas one of the comments that made immediate intuitive sense to me. By the simple principle of demand / supply ~ price, price controls (in a time of high prices, which is because of scarcity), should inhibit creation of more supply. Leaving prices to their natural forces should allow creation of more supply, which, regardless of the price level, should relax the market and lead to lower prices.
While price controls might keep the supply affordable to a larger share of the population, that doesn't help the fact that there isn't enough supply, so instead of money, other mechanisms influence who gets to buy the goods. This could be: Who is most willing to invest an unhealthy amount of time and energy, who is eligible to maybe acquire state funding, or simply who is the lucky one. Is any of this better than letting money decide? I tend to think no and think it would be better to have a functioning market with reasonable prices.
sugarplant
how high were you when you made this post?
sokoloff
??
I'm using those six quoted terms to have a meaning the same as what Google returns as the first definition for five and the second for one (which I think is obvious to all readers from context):
"functioning market" - A functioning market, in economic terms, is a system where buyers and sellers can freely interact to exchange goods and services, with prices determined by the forces of supply and demand, and where information is readily available. A well-functioning market is characterized by competition, efficient resource allocation, and the absence of significant barriers to entry and exit.
"sustainably" - 1. in a way that can be maintained at a certain rate or level.
"flooding" - 2. arrive in overwhelming amounts or quantities. I posit that no one was confused and thought I meant "1. the covering or submerging of normally dry land with a large amount of water."
"ideally" - 1. preferably; in an ideal world.
"quality" - 1. the standard of something as measured against other things of a similar kind; the degree of excellence of something.
"scarcity" - 1. the state of being scarce or in short supply; shortage.
intalentive
>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.
Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large.
Three potential outcomes of this trajectory:
1. Permanent extreme inequality enforced by a "post-liberal" surveillance state.
2. A moderating force, an FDR-like reformer, who represses capital for its own good.
3. Political instability and violence a la Luigi Mangione or worse.
inglor_cz
Here in Czechia housing costs are absolutely terrible, which is at least partly caused by an insane, Byzantine permitting process under which a basic block of flats in Prague can spend a decade in bureaucratic limbo before the construction can begin.
Yet this is not really a problem of financialized economy, the roots are elsewhere:
a. lots of NIMBYs, mostly curmudgeonly old people who want to block any change around them and, being in pension, have a lot of time to throw at thwarting anything. My personal experience is that they aren't really looking for money or profit, they just Simply Hate Anything New, Period,
b. the ease of weaponizing environmental and planning regulations against any building project, by the means of lawsuits,
c. local mayors have de facto (though not de iure) influence on the permitting process and they don't want to lose this tool of power over their constituents. It is an efficient way how to bash your enemies and reward your friends.
From what I know about the US, at least a. and b. apply in many places, too.
msgodel
Normally people deal with this naturally by having fewer children when supplies for basic goods like this are constrained so the population and prices would servo around an equilibrium.
High rates of migration upset this equilibrium. In the past it would normally cause wars and genocide because of that. I'm not convinced the current world is any different but a number of other people seem to be.
null
almosthere
Simple to make people sell, make property tax near Infinity if you rent it out in the first 5 years of property purchase.
Old rentals stay rentals, new construction is for people.
stego-tech
It’s not that simple, although taxation is a lever I see more governments willing to tug cautiously on in this crisis. I do think multipliers on low-density housing that’s not owner-occupied year-round is an excellent starting point, though, one that would really only harm a smaller subset of landlords while loosening supply in the short-term (1-5yrs).
Still, tax policy alone won’t solve such a complex issue. We need deregulation in matters of zoning, and increased regulation in terms of rent-setting (both amounts and lengths). We also need higher-density housing near transit stops, regulations on sales of existing homes with fossil fuel heat (gas and oil) that promote their proactive replacement prior to sale, stripping HOAs of authority to police familial genetics or relationships in household makeup (to promote more shared housing in existing developments), and so much more.
It’s a complex crisis that requires a complex solution.
epistasis
Still doesn't solve the problem of having enough houses.
Rented houses are still housing people. The problem isn't renting, the problem isn't loans, the problem is there's not enough houses where people want them.
stego-tech
That’s not entirely true, for a number of reasons.
* Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent)
* Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins.
* Construction has fundamentally changed as a result. No longer are structures being built for sustainable operations, but simply to exploit valuation growth before being shoved off to the next buyer. The goal from everyone involved is maximum margin/profit, not quality and sustainable shelter.
* There’s a glut of “luxury” apartments in higher-density units that sit vacant as a result of gaming the local marketplace for higher rent instead of maximum occupancy.
We have enough houses at present. Really, we do! The problem is that because we treat them as assets and not shelter, the goal is maximum revenue, profit, and/or valuation instead of maximum utilization.
Hence, housing crisis.
postalrat
New construction is still very expensive.
Workaccount2
Transpose the problem into a Taylor Swift concert and the problem becomes clearer:
Everyone* wants to go see Taylor Swift. She comes to a stadium and the sell out is instant, the aftermarket is bloody and ruthless. The stadium has 90,000 seats, 2,000 floor spots, and they are gone before you can reload the ticket page.
Taylor Swift is the embodiment of "good jobs". The stadium is the local housing market. Those VIP booths side stage with room to move around? The mega mansions. The lower tier seats? Upper-middle class. Nose bleeds? Upper lower class/bottom middle class.
Now solve the problem of the true value of these seats being so expensive. You can add more seats (this stadium happens to be extremely modular) but the experience for everyone becomes worse in a multitude of ways. You can add seats above the nosebleed, but it doesn't really do much to affect the closer seats.
So how do you solve this? How do you handle people who want to sell their ticket? Is it even possible to give people who can hardly afford nosebleed a shot at mid tier seats?
*Yes, I know you have no interest in seeing Taylor Swift.
postflopclarity
> the experience for everyone becomes worse in a multitude of ways.
your analogy requires the assumption that the stadium is already "at capacity" for the maximum comfortable number of seats
99% of American municipalities are nowhere even close to this capacity.
Workaccount2
Taylor Swift (and other super stars) don't play shows in 99% of American municipalities.
Companies want top talent for their workforce. They naturally will set up shop where they have easiest access to this talent (hence why you get industry hubs in different locales). The companies move to the spots for workers, and the works move to those spots for the jobs.
s1artibartfast
Yep, and these changes take place for reasons. For example, California and the Bay area have had 40 years of opportunity to make it easier to build, and ample people willing to pay.
There's an alternative world where SF and San Jose look like Singapore or Hong Kong, and policy is one of the big differences
have-a-break
Even worse, a lot of municipalities are losing population. But no-one wants to drop everything in their lives and move to a dying city, specially not high intelligence individuals who tend to gather causing home prices to skyrocket. Worse, those individuals tend not to buy into the types of housing typically seen by large developers building "relief" housing.
bethekidyouwant
Analogies are always bad, but in this case, I would say that if I wanted to walk to see Taylor Swift within 15 minutes, then most municipalities are at this capacity.
foobarian
Nice analogy. So it seems the solution would be to create more Taylor Swifts then, by investing in music schools and programs, talent shows, scouting, etc., where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources, but there are probably some underutilized spots that could support it. The rest would also be difficult due to property rights.
epistasis
> where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources
We actually ban nice places to live with walkability in the vast majority of the country. Our urban planning in the US been entirely focused on keeping out mixed uses, keeping out dense housing, the things that enable public transport to function at all.
Land and climate are much easier to manage if we were to simple legalize density and mixed uses. We are reaping decades of bad planning for car-centric lives, without planning ahead for future generations and their ability to find a home.
fireflash38
MUD of commercial/residential are popping up all over in suburban Maryland. I'm all for it - it's both pretty high density for burbs (townhomes/rowhomes), and local to shops and parks. The only thing that is really missing is bike lanes and better train transit. Some of it is nearby transit, but we need more transit faster to track developments.
nobody9999
>...where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources, but there are probably some underutilized spots that could support it.
Absolutely. And in fact there are lots of places that could support such things. In the US we call them "small towns" and "rural areas" and "the rust belt."
Areas where a lack of good jobs (as manufacturing left and farming became much less human intensive) drove folks to where decent jobs are (were?) more available.
Which drove up the costs of housing and, well, pretty much everything else, in those places.
However, with the technological changes we've seen over the past eighty years or so (Interstate highways, compute/semiconductor industries, ubiquitous networking, etc., etc., etc.), revitalizing those areas that have been left behind could boost both local economies as well as broader ones.
However, ALEC[0] and its corporate backers have sabotaged efforts to do so in pursuit of destroying competition and maximizing rent seeking. a lack of infrastructure maintenance is part and parcel of that -- as a lack of economic activity reduces the amount of tax revenue available for necessary infrastructure repairs and investments.
If companies could get symmetric, multi-gb internet, decent office space with decent road and rail connectivity to/from regional hubs in small towns and rural areas, more people would move in, prompting more housing development, more local businesses, more tax revenue, better infrastructure, etc., etc., etc.
This type of investment could have instant positive economic effects in poorer areas, and longer term (coupled with more housing), reduce the insane housing prices you see in NYC (median apartment rent in Manhattan is ~$4500[1]), SF, Boston, etc.
Unfortunately, statehouses appear to be fully captured by big corporations wanting to maintain their rents by stamping out any competition, the economies of those states be damned.
Sadly, the above can't happen unless the folks in those areas stop voting (in municipal/state elections) for the folks who are supporting policies designed to maintain the penury endured in those places.
There are so many good reasons to reinvigorate these areas, but we keep electing folks that won't bite the hand that holds their leash.
[1] https://www.brickunderground.com/rent/nyc-manhattan-brooklyn...
Edit: Added the missing links.
bluGill
You cannot do that. Taylor Swift is what she is not because she it better at music, dancing, or looking sexy, or sleeping with the record label executives (I don't know anything about her: the above list are the common things done to get positions like her, but not necessarily what she has done). What Taylor Swift is that is special is that nearly everybody knows about her (I'm a rare exception) - you can talk about her to strangers and have something in common because you know her music.
If you want great live music you can find that in a 1 in 10 bars around the country. (less if you want original music instead of covers). Likewise if you want to watch a dancer, though perhaps a different venue. If you want anyone sexy you can see sex better at a local strip joint. If you want to sleep with someone you can pick someone up in any bar (you probably couldn't sleep with Tayler Swift even if she was the type looking for a one night stand). However the shared experience of being a Tayler Swift fan is not something you can find if you stick to the local scenes. That national/international shared experience can only belong to a few people at any one time and no amount of schools, talent shows, scouting... can change that.
foobarian
It may not be a perfect analogy but I disagree that it's completely invalid. Use some imagination to make it work, e.g. with institutional support instead of having just local acts now there is Taylor, and Beyonce, and a few dozen other famous musicians.
Not everyone can live in San Francisco, but there exist other equivalent "nice places" of which there are too few.
lesuorac
But there's tons of places where the cost of housing is going up. If everybody was uprooting from Philadelphia to go to NYC then only NYC's prices would go up.
It seems to me that we already have multiple Taylor Swifts so having even more shouldn't be a problem. For many people, the school system is the reason why they own the house they do.
In my experience, many of the schools self-report having pretty bad math/reading comprehension amongst their students. I'm not picking a house based on it being "the best" or the one "I hear about the most". I picked it based on it actually having good outcomes. If other districts had that too I would've considered theirs.
pythonaut_16
In many places though it's more like most of the stadium is made up of various levels VIP booths. So one of the options is to replace those VIP booths with more dense traditional stadium seating. Only it's not enough to convince the ticket holders of one VIP booth to sell their tickets so more dense options can be sold, for some reason all of the VIP booths around that one also have to agree, and they're not so excited that plebeians might get to sit in dense seats right next to their pristine VIP booth to watch the show.
mcv
The real problem driving up prices, both in housing and concerts, is scalpers. They create artificial scarcity. If you want to fix these sort of problems, you have to do something about scalpers.
api
I concluded long ago that the only solution to unaffordable housing is geographic diversification. You can only cram so many people into one city before costs spiral for a myriad of reasons. The root of today's housing unaffordability is geographic consolidation of opportunity into a handful of places.
There's a ton of affordable housing outside the top ten cities.
For the most expensive places I'd advise young people to consider going there temporarily to get your career started, but don't stay unless you are making serious money -- enough to offset real estate costs. E.g. for the Bay Area I'd say if you're not making over $350k/year by age 30 you should leave.
bluGill
Nearly every city in the world has plenty of room for more. Most cities in the US dedicate more than half of their space to just cars, a great transit system could nearly double the density of the city while increasing the quality of life. Even in cities with good transit, they all have a lot of space dedicated to cars for people who don't find transit good enough (most of that isn't about snobs not wanting to mix with poor people, it is quality of service)
paulddraper
What adding a new showing?
Or taking a smaller venue and expanding that?
baggy_trough
There is nothing to solve; this is the best overall outcome.
kmeisthax
> You can add more seats (this stadium happens to be extremely modular) but the experience for everyone becomes worse in a multitude of ways.
To keep your analogy... well, analogous, this is also a stadium where you have to buy tickets in groups of at minimum four seats, with generous buffer zones of at least two seats between each group, specifically to cater to a handful of extremely vocal Swifties who couldn't bear to sit next to a stranger in their life. We could easily double the capacity of the stadium without impacting anyone's experience.
spicybbq
> Price Drops Don’t Lead to Supply. They Kill It.
Is anyone arguing that price drops "lead to" (i.e. happen before) increases in supply? It seems to me that it's the other way around: supply increases "lead to" price drops. This is what supply advocates hope to see in HCOL cities with expensive housing.
The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should respond to changes in prices.
Other policy goals are possible. For example, instead of "affordable housing", your goal might be to help the home building and financing industries never experience a down year.
crazygringo
> The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should respond to changes in prices.
Exactly this. Once you've built enough new housing and so the price has dropped to the point where it's not economical to build anymore, you're done. It's mission accomplished. The goal was achieved.
But the whole point is that you have to actually build all that housing to get there. Which is what we want. The author seems to be deeply confused about basic economic principles.
bandofthehawk
That doesn't solve the issue of housing being unaffordable to new buyers. How do you address affordability if the prices stop dropping before they reach a price at which an average young worker can afford to buy a starter home?
bluGill
We need to allow smaller houses such that people can afford to buy them then. Or we need to build apartments of all sizes so people can afford to rent them. The above is not an exclusive or - buying a house is a great choice for some and a terrible choice for others.
Affordable housing used to include a room where you share a bathroom and kitchen with the entire hallway. Affordable housing used to include tiny shacks. Air conditioning used to be something not even the rich had.
sokoloff
If the prices dropping to the cost of construction plus a 20% profit margin isn’t enough to make housing affordable then those people just literally can’t afford to buy housing.
Build smaller, worse, and cheaper until they can.
null
maplant
Right, these effects seem to lag each other. If prices are affordable, there's no reason to build more housing. We've achieved the goal of making affordable housing. Then, more people move in, prices go up, and the cycle repeats.
aprilthird2021
100%, supply leads to price drops. If it's not profitable to build anymore because housing costs have sunk, then there's much less demand for housing that needs to be met.
The biggest political issue is that Americans have been led to believe their homes are assets which appreciate in value. The abundance mindset threatens the net worth of many such people, but they are not the landed gentry of a democratic society. And the people who have nothing and can barely afford rent outnumber them and should vote for their interests.
andsoitis
> And the people who have nothing and can barely afford rent outnumber them and should vote for their interests.
my sense is they, too, want to buy free-standing homes with nice amenities that are not really necessary (not rent an apartment or buy a condo) and that appreciates in value.
kjkjadksj
The fact that there are still companies building new homes in say Youngstown Ohio shows that prices can fall significantly, by an order of magnitude even, in high cost of living metros before a point is reached where cost of labor and materials makes any build not pencil out.
yoden
> Price Drops Don’t Lead to Supply. They Kill It.
It really depends on how much you reduce costs. If you reduce costs enough, you can have increasing supply even in the face of falling prices. This argument sounds like one made by a hedge fund protecting its real estate investments.
The reality is that the housing market in the US (and most countries) is heavily distorted by government NIMBY regulations. Because of this, it's reasonable to expect that there is actually a lot of room to reduce the $/sqft if the market can build housing in general. Current costs are inflated by being forced into specifically prescribed solutions designed to grow the wealth of developers and landowners.
rossdavidh
Different states are very different in this regard; Austin Texas is considered the NIMBY-est city in Texas, and it's still building lots of houses even as prices drop, and have been for a couple years now. Other states do (mal)function as you describe, but not all of them.
cameron_b
Price reduction against builder margins would be a more reasonable way to look at it than raw price change, and additionally factoring in the degree of financing vs cash and the cost of financing would possibly shed more light.
Stable firms, not out over their skis, can afford to entice buyers while still making a profit. Just like in a startup, the cost of money and the degree of leverage sets the [minimum] speed limit on the runway.
queenkjuul
Where i live, NIMBYs just killed an ADU ordinance and were screaming just as loudly and about all the same things they would have if you were replacing their grandma's cottage with a high rise.
They can't be rationed with.
Social housing is the only thing that will really work.
anthonypasq
no, you just strip NIMBY's of their power. I frankly don't give a shit about grandma's opinion if the owner of the land wants to put a highrise there.
queenkjuul
Why do you care whether it's a developer or the city building it, then
georgeecollins
Because a developer is never too big to fail, it can't issue bonds and it will be outcompeted if it can't manage costs.
I am not against cities building, but where I live in California the excessive zoning, permitting and delays are at the core of the problem.
anthonypasq
i dont have super strong opinions about that, im just refuting your point that social housing is the only option.
ecshafer
I absolutely care if its a developer or the city building it. If its the developer who puts a high rise on my block, they want to make money and they sell it for a profit. The people that move in are the people that can afford a condo in a high rise. If its the city building it, they don't want to make a profit, they want to get votes. So after they fill the high rise with their quota of homeless people and a drug dealers. Its going to have a very different population and affect my neighborhood in a much more negative way.
fireflash38
After that is built, they then become the NIMBY because new buildings after them are threats to their income.
FireBeyond
Yeah, sounds like here. Homeowners on cul-de-sacs complaining about the rise in traffic and how it will keep them up at night. Complaining that improving the missing middle will lower projected year-over-year property value increases from 11% to 8%. Hyperbole and hysteria about having to widen streets to accommodate parking and traffic.
tsunamifury
This was tried the 60s in the us and uk, which gave rise to the ghettos torn down in the 2000s. There is little appetite on any side to re do that
It’s amazing how little history people seem to remember or know. I think people might be open to trying again if you could address what went wrong last time (extreme crime and poverty traps)
arethuza
A lot of "social housing" in the UK was perfectly decent and still exists - I grew up in a council house as did a lot of my friends. The main thing that has changed is that most of those houses have now been bought and are privately owned.
Yes, of course there were a lot of grim council housing estates (particularly tower blocks) that had to be knocked down but the causes were often a lot more complex than the concept of social housing being fundamentally flawed.
nobody9999
>It’s amazing how little history people seem to remember or know.
Yourself included.
cf. Mitchell-Lama housing[0]. It was enormously successful in creating housing (both rentals and sales) for significant numbers of people. In fact, such housing is still (70 years later) doing so.
We could use a whole lot more of that!
[0] https://en.wikipedia.org/wiki/Mitchell%E2%80%93Lama_Housing_...
tsunamifury
Cherry picking singular successes does not overcome the large amounts of data going the other way.
Please do better.
queenkjuul
Post war UK social housing was a huge success, and US social housing was deliberately turned into ghettos through deliberate lack of maintenance.
It's amazing how little history people who think they know history actually know
arethuza
Social housing, at least here in Scotland, is actually built to a higher standard than that produced for sale.
rossdavidh
While there is a problem in how we treat shelter as a financial product, the basic thesis (lower prices aren't allowed to happen) is incorrect, at least in some states. Florida and Texas (including Austin, my hometown) already have prices going down, substantially. Colorado and California seem to have started to follow suit. This did actually happen post-2008, nationally. There are places where we don't let housing prices drop, but there are plenty of others where we do.
btbuildem
This is because the overtly stated goals and the actual incentives are not aligned at all, they're closer to diametrically opposed.
The stated goal is "build more housing so everyone can have a place to live", but the current incentives are "bundle these materials and labour under guise of another product so you can sell it for a profit".
Of course developers walk away when prices drop -- their objective is to make money, not housing. The fact that they build homes people live in is purely incidental.
projektfu
I usually like Chuck Marohn, but it is a glaring problem when you claim that housing prices are falling in Dallas, and then talk about housing prices skyrocketing in Dallas, within a couple of paragraphs.
gota
Yes, that read weird to me, too, but it's because the 'lowering prices' are a snapshot, or recent trend (evidenced by the source being an index for April 2025 [1])
The 'sharpest rises' are from a long-term trend of a decade [2]:
> Over the past decade, the median home price has increased by 134 percent in Phoenix, 133 percent in Miami, 129 percent in Atlanta, and 99 percent in Dallas. (Over that same stretch, prices in New York, San Francisco, and Los Angeles have increased by about 75 percent, 76 percent, and 97 percent, respectively).
Here's my pictorial illustration of the curve because I like drawing silly plots in txt
|
| ____
| ___/ \ } Jan-April 2025
| ___/
| ___/
|_/____________________
| | |
2015.....2020.....2025
[2]https://www.theatlantic.com/economy/archive/2025/06/zoning-s...
projektfu
Increases in Dallas and Los Angeles are about average over the decade. (National average is 93.9%)
https://fred.stlouisfed.org/series/CSUSHPINSA
Here is another interesting chart:
https://fred.stlouisfed.org/graph/?id=CSUSHPINSA,SFXRNSA,LXX...,
Which place seems more expensive since 2000? Can you see the big drop in 2025?
I think the story of Atlanta and Dallas is a story of cheap housing being available for a long time until it started to get used up. In Atlanta, it's not just exurban development, a lot of in-city neighborhoods had some growing ability. But the mixture of people relocating to Atlanta and the constraints of a car-based city with difficult zoning have basically stopped new supply. Small single-family houses get replaced with larger single-family houses and the missing middle is harder to find.
pchristensen
"I like drawing silly plots in txt"
To thine own self be true!
vel0city
Both concepts can be true, just at slightly different times. As someone in Dallas, let me share what I've seen in housing prices.
DFW was seen as a pretty affordable place a while ago. In 2015 could get a 2,200sqft 4-bedroom house with a larger lot and a pool for $250k pretty easily. By 2020 that price was $320k, still decently affordable, still seen as a pretty cheap place to buy a home. By 2022 the valuations had exploded. Houses down the street of similar quality were selling days after listing at $550-600k. This then leveled off, settling around $550k. Houses around that price were still seeming to move pretty quickly.
Now I have neighbors cutting prices. A neighbor trying to sell has had their house on the market for months. They've already cut about $70k from their original listing price. Three more houses nearby have also entered the market and have been around for a few weeks. Compared to just a couple of years ago where the average house was on the market for maybe a couple of weeks.
roenxi
> The theory says we should be celebrating and accelerating home production even more to get prices to levels that would actually be affordable. The reality demonstrates otherwise.
Reality demonstrates the well known - the people who celebrate house prices going down don't have a loud voice in political circles and are ignored. Almost by definition they're going to be representatives of the world which doesn't have vast amounts of money and influence.
> Price Drops Don’t Lead to Supply. They Kill It.
And I love this one, it is the inverse of "nobody goes there any more, it is too crowded". If the price is low that means there is more supply than the market thinks it needs and more people who want a house are finding a house to live in. That may well cause less new builds, but more builds probably aren't necessary if the price is dropping. More people are being homed. At some point prices drop low enough that new builds should cease altogether.
aprilthird2021
> the people who celebrate house prices going down don't have a loud voice in political circles and are ignored
It's changing though. I'm seeing more people, even homeowners joining this chorus. Insane housing prices make everything expensive, and people are sick of everything being expensive. Even homeowners.
I agree that builders leaving is good. It means the prices have come down and demand / supply is getting better
disgruntledphd2
> I agree that builders leaving is good. It means the prices have come down and demand / supply is getting better
Not really, it just means that the builders can make more profit elsewhere.
aprilthird2021
Great, then that place is built to meet demand. And on and on and on
zesterer
Right, and if the original statement is true - that price drops are killing supply (without providing houses at a sufficient level) - then that implies that housing does not work like a traditional commodity. Which it doesn't.
epistasis
That's faulty reasoning. If the price drops stop new production, but there's still "demand", it means that the cost of providing new production is higher than what this demand can afford to pay.
But a big problem is that people try to view housing as not a commodity. They think that people don't move, don't change housing, don't need different things at different stages of their life.
If instead we actually view housing as the commodity it actually is, we would realize that the reason old cars are cheap is because we build new cars that are more expensive. That day old bread is only cheap because new bread was made today. Houses fall apart, the housing itself is actually going down in value every day. The land is the only part that rises in value, because we restrict its use so much.
New housing is nicer and more expensive than old housing, yet for some reason we are saying those with the least ability to pay should only be allowed to buy new housing. There are a ton of aging people in gigantic old houses that would like to downsize into something newer and smaller so that they don't have to walk as they age, yet that sort of non-car-dependent community is largely banned.
AnimalMuppet
Could you expand a bit on "which it doesn't"? How does it not, and why does it not?
I strongly suspect that 1) higher housing prices make builders more likely to build (or at least to max out their ability to build), and low prices (at least below some threshold) cause them to be more hesitant to do so, 2) high prices make people less willing to buy, and low prices make them more willing (or at least able).
So far, so much "working like a traditional commodity". Where do you see it working differently?
TrackerFF
Monotonically increasing housing prices is a privilege not everyone has. TONS of people, even in the rich western world, own houses that essentially lose their value due to inflation. Me and my siblings inherited a house in a rural town, which sold for less than what it was purchased for 30 years ago. Most houses in that town have seen stagnating prices, even brand new ones.
People still pour money into them every 10-15 years. But have to invest their money in other assets.
psunavy03
It's amazing the difference between different areas. I grew up in a single-family home in Ohio. Parents moved to New York when I went to college. I ended up in Puget Sound.
They bought their NY house by selling the Ohio one. Price was roughly equal, maybe a little higher. Now the NY one is double what the OH one is worth, and I couldn't afford to buy my own house today. Conversely, I could pay cash to buy the house I grew up in, despite the lot being 4 times the size of mine.
There's definitely haves and have nots real-estate wise in different parts of the country.
bandofthehawk
That doesn't sound like a problem of inflation. I think it's related to people migrating out of rural areas and into big cities. When you have a decreasing local population, home prices tend to fall.
This article is a mess. From the third paragraph:
> What happens when prices actually start to fall? Because that’s not just a hypothetical. It’s already happening in places like Phoenix, Atlanta, Miami, Dallas...
Then two paragraphs later
> In The Atlantic, Rogé Karma recently pointed out that housing prices are rising fastest in the very cities once seen as escapes from high-cost coasts, places like Phoenix and Dallas...
So which is it?
There is truth to the fact that the way the housing market is intertwined with the financial markets creates some risk, but those risks are manageable - a nationwide downturn in housing prices is exactly the kind of scenario addressed by the Fed's stress tests for banks.
The article is full of bizarre logic. An increase in housing supply leads to a fall in prices, which leads to a fall in supply? No, in fact the conclusion contradicts the premise. The author is making the classic econ 101 mistake of confusing the supply curve (which is supply as a function of price) and quantity supplied.
And finally the author explains his own solution which is... an increase in supply! But only the kind of supply he approves of ("small scale, incremental development"). Left unexplained is why this type of supply, if carried out on sufficient scale, wouldn't have the negative financial effects he worries about.