Many cities effectively ban or heavily restrict new housing developments that increase density.
I'm really not surprised real estate prices continue to rise when building new units is often an extremely expensive, risky process that in some areas can be stopped at any time with literally no reason required
Huh, why is college getting expensive, healthcare getting expensive, day care getting expensive, hell even streaming services getting expensive, none of these are heavily restricted that no development is happening there.
And in many cities breakneck construction activity is happening still real estate is getting very expensive.
One can easily see how high real estate prices can translate to all those being more expensive.
Colleges pay rent. Colleges pay salaries to people who pay rent. All those go up with high real estate prices. Further, even if the college owns a land, the money they earn on that land has to compete with what a developer who is willing to tear it down and put up a residential building which now earns higher rent or sale price.
I don’t think all the increase comes down to high real estate costs but it’s clear that high real estate costs can easily raise prices downstream across nearly every area.
I have a strong suspicion that a lot of it is the rise of the two income household. In the early years it increased household buying power, but as it became the norm many services began raising prices because people could actually afford to pay them now. So the net result is that the increased productivity from nearly doubling the workforce turns into higher and higher executive salaries while the average middle class household is now roughly back where we started, with the added burden of a whole second career.
Yes, this seems to make lot of sense. Initially second income maybe additional savings, day-to-day conveniences, some extra luxuries etc, now it is part of survival.
Since second job is sold as "freedom from household drudgery" and GDP booster it can't really be challenged.
Yeah, and property is a positional good. Its price is a function purely of willingness to pay. So if you double household income, and perhaps quadruple theoretical discretionary income (after food, energy, gas and so on), give it 40 years and real-estate inflation eats the damn lot.
Yes, if you can substantially increase supply in the top decile or quartile, in terms of desirability.
That's difficult, for all sorts of reasons. NIMBYs protecting their investment is one aspect, but the maths of density, transport infrastructure and travel times is another big deal.
Walkable, interesting downtowns AND big floorplans AND low taxes AND abundant supply within a short travel time is a tough set of constraints.
Because of government subsidies. (If you were willing to pay $100k for college and the government will give you $50k, now the college can charge $150k. Yes that's simplistic but it's the crux.)
> healthcare getting expensive
Healthcare is doubly removed from price feedbacks - patients don't pay for doctors, insurance companies do. Patients don't even pay for insurance, employers do.
Not too mention that the number of new doctors in the US is artificially constrained.
> day care getting expensive
can't help you on this one
> streaming services getting expensive
Streaming services started out undercutting cable prices. That's no longer necessary so the price is stabilizing. Plus now they are expected to produce their own content.
Expecting everything to have the same root cause is unrealistic.
> In economics, the Baumol effect, also known as Baumol's cost disease, first described by William J. Baumol and William G. Bowen in the 1960s, is the tendency for wages in jobs that have experienced little or no increase in labor productivity to rise in response to rising wages in other jobs that did experience high productivity growth.
Stuff that's made in China gets relatively cheap, so stuff that's not made in China gets relatively more expensive.
All government interference—significantly restricting supply and then doling out free money/tax-breaks to pay for whats left. As if govt leaders never took an econ 101 class.
I just think people who say this are very funny and weird. I took an econ 101 class, but drawing supply demand curves to talk about wide ranging governmental policy is just a bad methodology.
Where exactly did I say you should run a deficit? The words that I said were “wide ranging governmental policy.” I was thinking of examples like the minimum wage, where people often try to use econ 101 reasoning to definitively prove that raising the minimum wage must produce significant unemployment, when the real world literature turns out extremely muddy and contentious, ie the effect is much less than expected for a variety of complicated reasons that a supply and demand curve do not capture.
There is no supply restriction. We're close to the record-high number of housing units per capita, it's only a bit lower than in 2007, and we're likely to surpass it by 2026.
This is not the right calculation. Housing units per household makes more sense, as the number of people per housing unit has been shrinking since we started collecting data as peoples preferences change. From what I can tell it peaked in 2011 at 1.17 and has declined to 1.12 since, and considering that we expect some vacancy from moving, condemned units, and people prefer certain areas and dont like many others, the trend does not support that we have enough housing. Not to mention the prices clearly show demand is there
The calculation changes if you only include adults in the denominator - there is a lot more adults relative to children compared to the past. The solution is to remove the very much existent density and other supply restrictions - see:
https://marginalrevolution.com/marginalrevolution/2024/04/th...
Nope. It becomes slightly further from the record high numbers, but still better than at any time before 90-s.
At this point, the misery caucus is just grasping at straws. In a couple of years, the housing inventory will make even that metric irrelevant, but the price of housing will still be going up.
> The solution is to remove the very much existent density and other supply restrictions
Nope. The solution is the opposite: preserve the SFH at all costs and shut down the misery caucus. Build new cities, not new density. Create jobs outside of dense hellscapes.
Because the reality is that NOT A SINGLE CITY has lowered the housing sale prices by increasing the density of existing areas. Not a single one in the US, Europe, or Japan.
“Flat earth” style economic denialism is not as cool as you seem to think. Govt interference propping housing prices through various means was previously mentioned as well.
> “Flat earth” style economic denialism is not as cool as you seem to think.
Yeah, can you then point out an example of a city where densification worked to decrease the housing sale prices?
Tokyo? Nope.
Seattle? Definitely nope, even though its housing inventory grew by 25% within 12 years.
Moscow? Nope.
If it's so "round Earth", then there must be some early metrics that can indicate the success of densification railroading in places where it's been tried?
For example, Minneapolis went full cookoo nuts by abolishing parking requirements and the SFH zoning in 2019. They gave out the city to be screwed up by developers. How's it faring now? Oh, the price growth not only not slowed down, it ACCELERATED: https://fred.stlouisfed.org/series/ATNHPIUS33460Q
Do you know Mark Twain's definition of "insanity"?
I said nothing about "densification." This whole diatribe is in your mind. My original point was about there being a well-documented shortage of housing across the country. You can argue against it if you like but just look foolish.
You point at few absolute price decreases which is true but don't take into account multiple variables (like population increases, inflation, tax policy) or understand higher order derivatives. In which case you've got no business arguing in these threads.
We do NOT have a housing crisis. Not even close. Housing is more affordable and of better quality than ever.
We have a DENSITY crisis. People are forced by economic forces to move to relatively few unaffordable locations.
> You point at few absolute price decreases which is true but don't take into account multiple variables (like population increases, inflation, tax policy) or understand higher order derivatives. In which case you've got no business arguing in these threads.
What "higher order derivatives"? I read most of the new research on urbanist policy. And so far everything I've seen confirms what I said.
I gave you an actual link to the data. Sorry for destroying your whole world view, but "economy 101" is not enough to describe the complexities of the real world.
I'm really not surprised real estate prices continue to rise when building new units is often an extremely expensive, risky process that in some areas can be stopped at any time with literally no reason required