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paulddraper 5 hours ago

Increasing housing supply will absolutely decrease housing prices.

That’s so obvious it’s nearly a truism.

Rate of new houses is below the rate of new households, and it’s been that way for years.

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jjav an hour ago | parent | next [-]

> Increasing housing supply will absolutely decrease housing prices.

> That’s so obvious it’s nearly a truism.

And that is why Manhattan, due to having the most housing units per square mile, is one of the cheapest places to live in the US.

Since it's not, it is not a truism that merely increasing the housing supply will decrease prices. It takes more than that.

As long as you have excess people willing and able to buy $1M studios, every new studio will get snapped up. Prices can only begin to drop if you build so many that you exhaust the supply of people willing to pay $1M and the highest bid left is $900K.

Think of it as analogous to bond issuances. Just because the government issues more and more bonds the price won't drop as long as there are buyers to clear the price. Bond price only drops when they run dry of buyers at the higher price and must start accepting lower offers.

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forgetfreeman 4 hours ago | parent | prev [-]

"Increasing housing supply will absolutely decrease housing prices." True if it's the government building the houses, otherwise you hit a point where construction margins tank well before market saturation is reached. In practice new housing developments have a tendency to drag local real estate prices up (see also: gentrification).

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laughing_man an hour ago | parent | next [-]

That may be true in a very local area, but if you build something really nice in an area that wasn't very nice, the units that used to be mid are now near the bottom and have to lower their prices.

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epistasis 2 hours ago | parent | prev | next [-]

> In practice new housing developments have a tendency to drag local real estate prices up (see also: gentrification).

This is absolutely false, not true, disproven, and made up.

Social housing builders are good for many reasons, 1) they provide competition to the public market, and when efficient don't need to return profit to shareholders so provide a very good competitor in places like Finland and Singapore, 2) social housing builders smooth out the business cycle, because new housing is needed just as much when at the downturn of the business cycle as at the top, so it greatly helps provide stable employment and a stable workforce for housing construction, greatly improving housing.

But the idea that new idea drives up housing prices in any way is, at best, a fiction. It's mostly a lie from landlords and homeowners to try to justify their continued extraction of profits from their idleness.

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paulddraper 4 hours ago | parent | prev [-]

You’re saying that prices are bounded by construction costs.

Sure, as with every other good.

But there’s a long way to go between current property prices and raw construction costs.

	▲	jjav an hour ago \| parent [-]
		> But there’s a long way to go between current property prices and raw construction costs. How much? Searching a bit suggests that net profit margin in housing industry is about 8.7% Consindering an investor can get ~3.75% in zero risk T-bills without lifting a shovel, that's about an extra 5% net profit to get involved in building housing. Which isn't nothing, it's a decent profit. But I also wouldn't call extra 5% a huge difference.