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.
I think that premise assumes that residents never move from areas with lower housing supply to areas with higher housing supply. A behavior rooted in economic gradients.
Migration in response to price differentials, voting with your feet, spatial arbitrage, spatial equilibrium, geographic mobility of labor, the Tiebout model...the phenomenon goes by many names.
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.
A related theory that I find intriguing is that the benefits of productivity gains have largely been claimed by the financial industry. As productivity improves, more credit is made available, people take on more debt to purchase a home because if they don't someone else whose can also service a larger debt will. This ultimately just drives up the price for everyone, leaving people no better off than they were before. The winners are those collecting the loan repayments.
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.
what you're missing is that the demand curve for housing is basically a vertical line. most people will never buy/rent more or less than one unit of housing, and they will pay literally anything to keep it from being less. therefore even if there is a surplus of supply there isn't a competitive market.
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.
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.
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.
Workplaces tend to agglomerate, for all sorts of reasons.
Biking distance is, what, five miles? Ten?
Economics & geometry mean it's challenging to provide enough of this that the median family can afford it. It's quite practical to do at the scale of a small city (250k population ish), but such places tend to be relatively poor unless they have some premium offering, a top university or a high-margin specialist industry.
Big business seems to prefer bigger cities (they want a large talent pool, and peoples' willingness to relocate can be limited), and at that point for the average citizen, you have a choice between higher-density apartment living with biking distance, or the family home but a longer commute.
The relocation thing is a bit of a vicious cycle tbh, high property prices make it harder to move, but also make people more invested in what they've bought, which in turn makes them less keen to relocate, which forces companies to locate where talent is, which pushes prices in those areas up further.
There are a lot of different types of workplaces, from office towers to corner stores to shipping ports to neighbourhood restaurants to nail salons to farms to industrial parks. I think with office towers being the only possible exception, the rest could easily have all of their workers live within biking distance. The office towers can be located walking distance from a metro stop.
The key is just to avoid restrictive zoning that prevents people from opening a barber shop or a corner store in their residential neighbourhood.
That and having a dynamic housing market; flexibility in other services e.g. schools, so that people can move where work is, and move somewhere else when they're not working; and building mixed-use neighbourhoods that have schools, doctors, sports facilities and so on.
Not sure how the US handles that, but in my country (UK) there are various factors that mean people don't move as much as common sense might suggest. High sales tax on houses, very variable quality of schools meaning the good ones are oversubscribed and if you move your kids may end up at a worse school some distance away, and so on.
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.
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.
Yes, that's broadly a good thing which tilts the playing field in favour of locating productive people close to their work.
Whether it's possible to set it at a level strong enough to produce the right "nudge" without creating a bunch of unintended consequences, harder to say. Probably worth trying in a few city-regions though to see what happens.
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)
Some of them are renting them out, yes. But I still think it should push the price up because people with zero houses will be competing with people with > 1 house, which increases demand.
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.
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.
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.
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.
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.
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.
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.
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.
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!