
There is more to high house prices than constrained supply - jedwhite
https://www.economist.com/finance-and-economics/2018/11/24/there-is-more-to-high-house-prices-than-constrained-supply
======
phkahler
Home prices vary inversely with interest rates. Here's how that works:

1) person tells bank they'd like a mortgage to buy a house.

2) banker asks for info on income, expenses, etc.

3) banker estimates persons maximum monthly payment.

4) banker figures out max loan amount based on #3

5) buyer is encouraged by everyone to spend the full amount from #4

Everyone - the seller, their agent, your agent, the bank, and maybe some
others - want you to spend every penny you can. Everyone benefits from higher
prices except the buyer. Even if you're immune to it, there is enough pressure
that the market as a whole tends toward the highest prices people can afford.

Now lets see how interest rates play in this. At step 4 above, the amount you
can borrow for a given monthly payment is mathematically increased by lower
interest rates. For a given amount of debt your payment should be lower if
rates are lower - that's true - but they'll make up for it by pushing a larger
loan.

Ultimately your payment is determined in step 3 and has nothing to do with
interest rates or home prices. You will "pay" the same for your house (total
payments) regardless of interest rates. The only thing the interest rate
determines is who gets the money - the seller or the bank.

In a services and consumption based economy this is the primary way interest
rates drive things. Sure, businesses will do their part too, but they're a
smaller part of it.

~~~
mattm
It's crazy how this isn't more common knowledge that the Economist needs to
write an article about it. We're also seeing the same thing recently with
tuition prices. There is more money available for student loans so schools
just jack up the tuition to meet the supply of money available.

~~~
fbonetti
It drives me crazy that people don’t see the very simple reason why tuition
has risen so much: student loan debt is not dischargable through bankruptcy.
Even if the student is run over with a bus the debt can be passed on to family
members.

The lenders that give out these loans therefore have essentially no risk and
are highly incentivized to give out loans to any and every person that wants
one, regardless of their creditworthiness or future earning potential.
Universities have responded to this glut of money and demand by raising
prices.

The solution is to allow student loans to be discharged through bankruptcy.
Banks will respond by properly evaluating the risk of each loan instead of
giving them out like candy. This will result in less students going to
college, but that’s a fair price to pay to correct this massive distortion in
the market.

~~~
WalterBright
I would expect that such rising demand would result in more universities being
built, and big expansions of existing ones.

~~~
fbonetti
This will happen eventually, but it takes a massive amount of resources to
build a university from scratch, and existing universities risk diluting their
brand if they take on too many students.

------
yholio
The price of houses is driven by market rents compounded with access to
financing. If lenders are willing to finance an investment with 3% yield, then
house prices will jump to 33x their annual rent value - it goes without saying
that's only possible in low interest markets.

The rent itself however is controlled by supply and demand - there needs to be
a real person there earning a paycheck and he must have no other options
before going for a high rent house. Therefore, the options for keeping rents
down are either keeping people out of the city through administrative means,
or, realistically, building higher and denser. Good public transport
infrastructure is an essential component because it opens for development
distant areas that otherwise would not be desirable to people working in the
city.

On the other hand, as the city grows, economies of scale bring in more
businesses, create more high paying jobs and opportunities, therefore
attracting more people - up to the point where rents and commute times
increase again and restore equilibrium. A Malthusian catastrophe of sorts,
that requires radical new transport solutions and workplace transformations,
as opposed to building regulation and financial innovation.

~~~
thaumaturgy
> _The rent itself however is controlled by supply and demand_

No, it's not. Folks have got to stop using simplistic remedial high school
economics classes to explain complex social problems. They just aren't that
simple.

During the 2008 financial implosion, a single investment company called
Blackstone Group went on a buying spree around the US. As of this time last
year, they owned, through a subsidiary company, fully 1.5% of the entire
Sacramento-area rental house market [1]. Blackstone in turn is flush with cash
from foreign investors [2].

Foreign cash investment in real estate is a major cause of high rental prices.
But the data on this and investment companies like Blackstone Group is spotty
and difficult to follow [3], on purpose.

These groups don't set prices according to "the market". They are more than
happy to let some percentage of their properties remain empty rather than
decreasing rental prices, because they can claim the lost rents -- at the
prices they set -- as taxable deductions. It's a net win for them: keep the
price high for all their other properties, get a writeoff on their empty
properties.

Building more housing is not going to fix this part of the housing problem.
There is more than enough foreign capital available to continue to keep
housing prices artificially inflated no matter how many new homes are built.
These are long-term investments and small fluctuations in available housing
are not going to shake them loose.

Much more comprehensive investigation is needed in the actual causes of high
housing costs, including the effects of foreign investment and investment
firms, and then reform is needed to address those causes.

[1]: [https://www.kcra.com/article/this-is-the-largest-owner-of-
re...](https://www.kcra.com/article/this-is-the-largest-owner-of-rental-homes-
in-the-sacramento-area/13520555)

[2]: [https://www.bloomberg.com/news/articles/2018-10-22/how-
black...](https://www.bloomberg.com/news/articles/2018-10-22/how-blackstone-
landed-20-billion-from-saudis-for-infrastructure)

[3]: [https://calmatters.org/articles/data-dig-are-foreign-
investo...](https://calmatters.org/articles/data-dig-are-foreign-investors-
driving-up-real-estate-in-your-california-neighborhood/)

~~~
darawk
Basically none of that makes any economic sense. The fact that Blackstone can
own 1.5% of the property in Sacramento is a supply issue. I.e. we are back to
supply and demand. The entire rest of your post hinges on there being no
supply response to demand. So yes, once again, everything is still and always
will be mediated primarily by 'remedial high school economics'.

> Building more housing is not going to fix this part of the housing problem.
> There is more than enough foreign capital available to continue to keep
> housing prices artificially inflated no matter how many new homes are built.

No...that's not how anything works. Foreign capital is not infinite. And
foreign capital invests in the US real estate market _because it expects a
return_. If you change the expectation of supply, guess what happens? People
don't want to invest in that asset anymore, and the capital dries up.

This is all a lot easier to see if you actually put yourself in the shoes of
one of these 'foreign investors'. Don't think about them as an abstraction -
think about yourself. If you were a rich Chinese businessman, ya, the SF
property market is a great place to park your cash. Because it's supply
constrained. But you better believe the moment that supply situation changes
you're going to be running for the exit.

~~~
thaumaturgy
These replies to my comment are super weird. I'm reading them collectively as,
"I don't see how the influx of millions and millions of dollars of investment
capital would have an effect on housing prices."

Well, okay, I guess. How many houses do you think need to be built to satisfy
the investment needs of everyone looking to outperform the S&P 500? For extra
credit, realize that this means that every metropolitan market is now an
_international_ investment vehicle.

~~~
darawk
> These replies to my comment are super weird. I'm reading them collectively
> as, "I don't see how the influx of millions and millions of dollars of
> investment capital would have an effect on housing prices."

Huh? Let's talk about the rice market, rather than housing. Let's say you dump
1 trillion dollars into rice. What's going to happen? The price of rice rises,
dramatically. However, rice farmers the world over see that price rise, and
they start growing more rice. If you keep buying 1 trillion dollars worth of
rice every year, the rice farmers will grow more rice in response, and the
price will start to fall.

You, being a rational rice investor, will see that happening. And unless
you're an idiot, will stop dumping your money into the rice market.

The only reason that houses are any different from rice is that housing is
supply constrained, whereas rice is not.

> Well, okay, I guess. How many houses do you think need to be built to
> satisfy the investment needs of everyone looking to outperform the S&P 500?
> For extra credit, realize that this means that every metropolitan market is
> now an international investment vehicle.

This question doesn't make any sense. You don't create homes so everyone can
outperform the S&P. That's like asking "how many stocks do we need to create
for everyone to be an early investor in a decacorn?".

The question you're trying to ask is: How many houses do we need to build
until the rate of return on buying property equals the rate of return of the
stock market, adjusted by risk. To be precise, you want the number of homes
that need to be built for the Sharpe ratio of the residential real estate
market to equal the Sharpe ratio of the stock market.

That question is going to vary by geography. Many housing markets already
dramatically underperform the S&P. It's only a very small number of them that
perform better. In aggregate, housing already does underperform the S&P.

~~~
thaumaturgy
I think I'm getting your comments. I don't think you're getting mine.

> _What 's going to happen? The price of rice rises, dramatically._

Yes, which is what has been happening in housing.

> _However, rice farmers the world over see that price rise, and they start
> growing more rice._

And here's where your analogy falls over, because (a) the availability of land
for residential real estate is not infinite; (b) it requires a far, far
greater capital outlay (and time-to-market) to build housing than to farm
rice; (c) developers are incentivized to build expensive housing because
that's where they make more money.

That's where my earlier comment came from: the amount of new housing required
to satisfy this equation from the supply side would be _enormous_ , as would
be the environmental destruction it would cause.

> _And unless you 're an idiot, will stop dumping your money into the rice
> market._

 _Only if there 's a better place to park my wealth_. That's where all this
money is coming from: people with money, who want to make more money, and are
dissatisfied with the returns available in a lot of other investment vehicles.

> _It 's only a very small number of them that perform better. In aggregate,
> housing already does underperform the S&P._

Oh, c'mon. Deal with me honestly here. We're not talking about BFE, Iowa,
yeah? We're talking about housing in metropolitan areas, and I'm pretty sure
I've been specific about that in my comments on the subject so far. Y'know,
the areas where there _is_ a lot of investment money -- demonstrably -- and
where there are ridiculously high housing prices to go along with it.

~~~
darawk
> And here's where your analogy falls over, because (a) the availability of
> land for residential real estate is not infinite; (b) it requires a far, far
> greater capital outlay (and time-to-market) to build housing than to farm
> rice; (c) developers are incentivized to build expensive housing because
> that's where they make more money.

Well, you're using the word 'availability', but that sounds a lot like
'supply' to me. So, i'm not sure we really disagree here. Though I would add
that for the most part, land supply is not the constraining variable in almost
all major metropolitan areas (exception for places like Hong Kong).

> Only if there's a better place to park my wealth. That's where all this
> money is coming from: people with money, who want to make more money, and
> are dissatisfied with the returns available in a lot of other investment
> vehicles.

Sure, so they bid it up until its risk-adjusted net-present-value equalizes
with other assets. But all that is is restating the fact that these particular
plots of land are worth a lot. It doesn't answer the question of _why_ they
are worth a lot. For that, you must look to supply constraints and network
effects.

> Oh, c'mon. Deal with me honestly here. We're not talking about BFE, Iowa,
> yeah? We're talking about housing in metropolitan areas, and I'm pretty sure
> I've been specific about that in my comments on the subject so far. Y'know,
> the areas where there is a lot of investment money -- demonstrably -- and
> where there are ridiculously high housing prices to go along with it.

I'm not trying to deal with you dishonestly. I know you are talking about
major metro areas. My point in pointing out the heterogeneity was to point out
that we only know ex post that the particular areas you're thinking of have
done well. If you were an investor in say, 2003, it may not have been such an
easy call, and similarly, it may not be such an easy call now.

Let's say you had $10 million to invest. Where would you put it? Would you
chuck it into SF real estate in the current market? I'm not sure I would. I
think the market is quite high, especially given the rising interest rates,
and I think the anti-nimby movement has gained a lot of steam, and the bay
area has a lot to lose from that, in terms of property values. If I were
trying to park $10 million, I think i'd actually shy away from areas with sky
high valuations that are built on such monocultural foundations (tech).

------
davidhbolton
I take issue with the statement that since 2005 rents in London have only gone
up by less than 4%. This is personal data but In 1998 I was paying £650 a
month for fully furnished. In the same building but on the top floor
unfurnished is £925.

I bought in 2000 and sold in 2015 for three times what I paid. The main people
buying where I lived in East London, were from West London where rents were so
high it was effectively cheaper long term to buy in East London. Number 47 on
this page. [https://www.rightmove.co.uk/house-
prices/E10-6QB.html](https://www.rightmove.co.uk/house-prices/E10-6QB.html)

My son-in-law and his wife had moved back in with us a year or two earlier
because rents in East London had gone up. In 2015 a typical 2 bed flat in East
London was £1,400 per month, West London around £2,500.

There's a simple reason why house prices and rentals in London have gone up.
Demand due to mass migration. Back in 2015 London's population was at an all
time high, numbers not since seen 1939 apparently.
[https://www.trustforlondon.org.uk/data/londons-population-
ov...](https://www.trustforlondon.org.uk/data/londons-population-over-time/)
Many properties were bought-to-rent though that got hit by changes in law.

~~~
stolk
Your personal rent example: 650 -> 925 in 20 years is very meager growth, well
below inflation: 1.78% per year.

So yes, less than 4%. A lot less.

>>> (925/650.0) __(1.0 /20)

1.0177975914387338

Note that 20 years of +1.78% per year does +42% compounded.

>>> 1.0178 __20 1.4231442772353857

In real money, the rent for your place has gone _down_ , not up, ignoring the
furnishing.

~~~
stolk
The double star * * 'power' operator was removed from my text.

(925/650.0) raised to the power (1/20) is 1.0178

1.0178 raised to the power 20 is 1.42

------
will_brown
Housing prices are artificially high because of debt and finance.

If loans/debt/financing/mortgages were made illegal, then these artificial
high housing prices based on the credit line one can obtain rather than what
one can actually afford, prices would come down to fair market value. I know
people will claim credit is based on what one can afford but that is mental
gymnastics (foreclosures, student loan defaults, car repos, and credit card
defaults could all suggest otherwise)and wouldn’t matter if credit were made
illegal.

The same is true of student loans. Tuition costs couldn’t continue to
exponentially (artificially) increase based on the guarantee of government
loans to students to cover these costs, take away a the loans and the prices
will meet the new demand.

~~~
johnpmayer
Credit allows people to purchase things beyond their current wealth but rather
within their future means to pay (their future productivity and
trustworthiness). This is particularly useful for those who aren't born into
wealth: Credit is practically the only way for normal folks to access
productive capital, such as a home that allows you to avoid paying rent, or an
education that in theory makes you more productive in the future.

You are correct to point out that the prediction of one's future ability to
pay (their future productivity and trustworthiness) is difficult. But I think
eliminating credit (at least when used to purchase productive capital) is
throwing the baby out with the bath water.

~~~
__blockcipher__
IMO homes should not be considered productivr capital. Farms are, as one
example.

A home sits there and looks pretty (maybe), slowly losing real value. Of
course, w/ an increasing population amd limited supply it accrues nominal
value (and “real” value in the investment sense).

Yet compared to owning shares in an actual productive company, it’s a very
poor value proposition.

~~~
johnpmayer
A home produces rents. If you live in the home that you own, you can think of
it equivalently as a productive asset that provides you one unit of free rent
(modulo some quality of life factor based on how nice the property is to live
in) every month.

~~~
boombust
If you look at it through the lens of opportunity cost, sure. But homes don't
actually yield anything, they are not productive in that sense. So from the
economy's standpoint, there seems little reason to classify it as such along
with financial assets that produce yields.

------
topkai22
There is a point that is often glossed over in these analysis- the rental
stock and the ownership stock are often fundamentally different. Last time my
family moved we weren’t opposed to renting, but there was something like 1/10
the number of available SFH rental units in the area we were looking compared
to available SFH rental units.

In the US at least I think there is a case to be made that this is due to the
UNDER financialization of housing- if you own a home at want/need to move it
is difficult for most families to do anything but sell their current home in
order to qualify for a mortgage. This suppresses the rental stock even when it
is financially reasonable to rent out a house versus selling. (Yes, there are
companies buying SFH housing to let out, but they seem small compared to the
overall market right now)

~~~
burfog
It may seem financially reasonable to rent out a house, but normal people
don't want the risk and hassle.

Renting out houses is an occupation, with special skills. You have to navigate
the legal situation to avoid being sued, while still doing your best to refuse
people who seem like they could be trouble. You can expect damage and non-
payment of rent. You can expect the state to make it extremely difficult for
you to get rid of destructive people who aren't paying. You can get sued over
a lack of repairs, but meanwhile the renters are causing the damage and
failing to tell you about it. Renters will ignore water leaks that don't seem
to impact them, letting your home rot from the water. Renters will smoke and
keep pets, despite any rules to the contrary, and they will fail to control
destructive kids. Renters will illegally authorize workers to drill holes to
run cables through the walls.

I've known people who tried renting out a house. They ended up with drug
dealers, prostitutes, new doorways and other openings being cut, a bloody
murder scene, floors and walls rotted out, destroyed cabinets, etc.

Most new homes are in home owner associations that prohibit renting houses
out.

------
fovc
In case anyone else is wondering, 161% since 1996 is 4.4% per year compounded.
I think annual figures are more relatable and wish publishers would just state
those

~~~
PunchTornado
4.4 per year is huge. wish my salary went up like this between 2008 - 2014

------
rb808
Absolutely. On top of the interest rates (and QE) we have:

1\. Cities becoming much wealthier, and lower crime, resulting new generations
moving there 2\. New immigration wave to Western Countries. (UK esp had
population relatively slow growing pop in the 50s, 60s, 70s) 3\. A big
demographic bulge of baby boomers getting ready for retirement saving as much
as possible, looking for investments 4\. Lots of money coming out of China
looking for investments 5\. Two huge stock market crashes leaving most people
wary of stocks and seeing property as a safer investment 6\. A combination of
all factors pushing property even higher into bubble conditions.

~~~
tonyedgecombe
Probably more important than any of that we have gone from a population with
three generations alive to one with four generations.

------
TangoTrotFox
I think the argument here is directly analogous to why university prices
started going loony. When it became impossible for even private education
loans to be dismissed in bankruptcy suddenly education loans became seen as
very near 0 risk. And everybody's told from the time they're in diapers that
they _need_ to go to university, with cost given little to no consideration.
And it's also seen as priceless investment that will pay for itself and then
some in the future. Suddenly people value something immensely and have access
to an effectively unlimited line of debt. This incentives universities to
arbitrarily increase their costs. University costs only started to stabilize
as university enrollment started to decline.

But there's a big argument against this that I don't see the answer to.
Everything that's mentioned in this article is true for buying a house, but
not for renting. Rental prices have also gone through the roof - and the only
reason they're able to go through the roof is because people are able and
willing to pay the costs asked. But people renting are getting absolutely no
return whatsoever on this exchange, and rent is also generally not paid from
debt. So how would this explain the willingness of people to pay ever higher
prices for rent?

------
vanbytheriver
I purchased a van that I am going to rebuild into an RV and live in San
Fransico at a fraction of what I would throwaway on rent and interest to the
bank.

Some googlers got the same idea and slept in the google parking lot!

It does not make sense to purchase expensive properties with the record low
interest rates. As soon as they rise again, your property will lose in 10s of
thousands of dollars in value and you will be tempted to walk away from it.

~~~
conanbatt
I think its a fine way to save money, but that is basically choosing to be
homeless and live like a pauper.

When you have 200k+ salaries and you find it appealing to live like a minimum-
wage worker with no family, it should raise a red flag.

~~~
wpdev_63
Many people live alot more comfortably within a van than they do in their
stationary home. They can go to the beaches during the summer weekends and go
out to colorado during the ski season and bring their home with them. This is
one of the many couples that are doing it these
days:[https://faroutride.com](https://faroutride.com)

If you get 90% of your home comfort in a finished conversion van and you save
50% if your wealth, it's a no brainer.

You'll also be avoiding the inevitable housing crash.

Why on god's green earth would an employer care about where you live?

~~~
conanbatt
You'd be living in an illusion to believe living in a van is a higher quality
of life than having a proper place. Its a ridiculous comparison, no matter how
hipster some modern choices can become.

Would you raise a child in a van? Down by the river?

~~~
wpdev_63
Well then living in a conversion van wouldn't be for you. For many young
professionals who can work remotely in the west coast, it's a very compelling
option. Especially with the fact you throw away a significant portion on your
income on rent. With a van it's significantly cheaper(less than half) and at
the end of the day, you own it.

There are other issues but many people have figured it out and there's a
vibrant van(life) community that's thriving due to the sky high property
prices.

------
simonh
I think the discussion so far, while interesting, is tangential to the point
the article is trying to make. The point is that supply of housing isn’t the
only thing affecting house prices. If you view houses as financial assets with
varying value, it’s the supply of financial assets that matters, not just the
supply of houses. Or am I missing the point?

------
jondubois
Corporate growth is a major culpit. Corporate growth means that corporations
open up more HQs and offices and create more jobs in major urban centers. By
taking market share away from small regional businesses, corporations are
destroying jobs in regional towns and creating jobs in big cities instead.
People are increastly forced to move to big cities to find jobs. As more
people move to big cities, demand for real estate in those cities goes up. Big
cities struggle to increase the supply of real estate due to limited space.

By moving to big cities, value-creating workers are increasingly forced to
compete against wealthy owners of capital for the limited supply of real
estate. Wealthy owners of capital don't need to work for their money, so
they're willing to spend a lot more to buy houses that they don't even need;
this drives up house prices for everyone else.

------
gweinberg
The author is writing as if housing construction just happens irrespective of
demand. People will build new housing if they are confident it will earn a
profit. It stands to reason that if new construction is allowed, housing
prices can't stay much higher then construction costs for long.

------
TheRealPomax
Effectively: as long as people need to borrow money to buy a house, housing
prices will be high because instead of buying a house, that house has to make
someone money. And that someone isn't even you.

------
fallingfrog
I have to say I just don’t understand why anyone would willingly pay the kinds
of prices for housing that I see people paying. It seems like the consensus is
that you should pay 2.5 times your household income on a house; I see people
around me paying 5 times or more. That’s _bonkers_. We paid 1.25 times our
household income and we’d never have considered more. I’d rather live in a
double wide than put that much of my income into a sunk cost like that. No
way. Everyone is just behaving in a totally irrational way and I don’t get it.

~~~
bognition
> Everyone is just behaving in a totally irrational way and I don’t get it.

A lot of people don’t have the luxury of paying only 1.25X their salary.

Take Boston for example. You’d need to live more than an hour out of the city
or in a city with terrible schools to find a house that cheap.

Lots of people are optimizing for more than just price. Things like quality of
education and commute also factor in.

So please realize housing is incredibly complex before judging everyone else
as irrational for not making the same life choices as you.

------
lifeisstillgood
South East England has an interesting problem - for a decade or more Dirty
Money from Russia, China and elsewhere has poured into London, as bankers and
lawyers turned a blind eye.

As the "big" properties in London went into the multi millions the original
owners moved out one rung, and those owners moved out one and so on. The
commuter belt is apparently shored up by billions of dirty money

But now it's drying up. Maybe tougher enforcement, more likely competition
from NY / Nevada and Brexit uncertainty but it seems to have tanked the
market.

------
gfodor
Don't forget about the _direction_ of rates. If interest rates are trending
upwards, that can increase the urge to buy out of fear of being unable to
afford housing later.

------
mancerayder
What about construction costs? In the US costs have gone up due to:

\- Tariffs which affect steel and timber

\- higher wage costs due to low unemployment (perhaps the most benevolent of
the list)

\- a construction boom in certain areas (Brooklyn comes to mind) leading to a
scarcity of construction professionals being available

I'm sure 'new construction' costs being high affects the prices of second-hand
properties, which scale up. Even more so if they're renovations.

------
acd
Banks create money out of thin air, fractional reserve banking. When the banks
go bust the Central banks save the debts. People speculate in house prices,
people loan more for their new home than their old one, new debts are created.
It goes on until there is a bust in the market, either financial shock, or
price discovery that the loans are not sustainable.

------
xwkd
Take a look at the lumber market. The cost of building materials has been
shooting up for the past 10 years. I believe houses are getting more expensive
because returns on new builds come with much higher risk.

It’s cheaper to recycle the existing real estate market.

~~~
sjg007
Materials, labor and everything cost more today. 2008 wiped out a good portion
of home builders / construction workers. Also basically nothing got built for
5 years until house prices recovered. Also factor in a high COL area and you
can't really buy for cheap either the the land or the build.

~~~
rb808
> 2008 wiped out a good portion of home builders / construction workers.

In the US/Ireland/Spain maybe, in most countries house prices didn't fall -
they rose with the low interest rates.

------
true_tuna
But there’s also extremely constrained supply. Look at Mountain View CA from
2000 to 2010. The city blocked new housing religiously for a decade while
welcoming tens of thousands of new jobs. Now traffic is insane, housing prices
are insane. Tell me simple supply and demand is not at play here. If we add
jobs we gotta add housing. It’s baffling that we’d try to do anything
different. And yet every city in the Bay Area is happy to welcome new jobs and
blocks new housing at every turn. There’s a muddy field right next to google
campus. Been vacant for at least a decade. Zoned for hotel. Nobody wants or
needs a hotel there. High density housing yes. Hotel no. I’m not interested in
any conversation about the housing crisis that ignores this simple idea. Add a
job? Permit a housing unit. Do that for a decade and then we can talk about
the other factors.

~~~
masonic

      The city blocked new housing religiously for a decade
    

Specific examples? (I'm a MV resident for 26 years and have seen no such
examples.) There have been significant blocks against new retail (e.g. the
"gorilla" campaign that killed the Home Depot at El Camino and the Americana),
but not housing. There's little bare land except on the Bay side of 101.

------
elchief
AirBnB makes owning a home more valuable (basically double rental income)

And several trillion dollars of hot money left China and ended up in the
Pacific ring real estate market

------
ouid
Well there's also the MITC, but no, the market determines the price.

------
mcguire
Sigh.

I've been saying this since the early 2000s when I saw even lower end new
construction getting Corian or granite countertops as standard. Easily
available money causes prices to rise.

------
sunsu
Asset inflation.

------
baybal2
>Low interest rates and innovations in the mortgage market may also be to
blame

Low interest rates and innovations in the mortgage market _are to blame_

You are simply letting a person to buy more of any big, expensive asset. And
the thing does gets out of control fast when there is a even minimal
expectation of appreciation, and inflation fears.

And that on top of the fact that real estate is the only "investment" possible
for an ordinary person without employing an officeload of securities attorneys
in many countries.

Chinese housing market is the prime example (2B vacant square metres, with
even more in the pipeline)

~~~
mooreds
All real estate is local.

Certainly the innovations mentioned are part of the issue for most markets,
but for some markets there are other impprtant factors:

* The flood of expat money (Vancouver)

* Supply constraints due to geography and/or Nimbyism coupled with net in migration (Bay area)

* Builder hesitation plus in migration (Front range of Colorado)

Hard to paint one picture. However, making mortgages easier to get has a broad
effect on demand, which will definitely shift the curve.

~~~
sgroppino
But there are other factors like tax. In the UK for example you generally
won't need to pay capital gains tax when selling your main home...

~~~
jimnotgym
... and even as your second home capital gains is taxed at a lower rate than
income. Plus it can be deferred until you die! If your estate is big enough to
be worth it you can form a trust and defer it forever.

That unpaid tax flows straight back into the housing market.

