With you until the last sentence. The high prices for small condos in urban centers are an indication that there are fewer of them in supply relative to what the market demands. There's nothing wrong with letting urban centers densify and serve as a containment zone for childless 20-somethings (in fact, this would mean more affordable single family homes for those that need them). And who knows, if there's enough dense urban housing to meet demand, then those residents could have an easier saving up money themselves, with which to later purchase some more space in which to raise a family
> The high prices for small condos in urban centers are an indication that there are fewer of them in supply relative to what the market demands.
Be careful trying to apply ECON101 micro principles when looking at property markets: property markets are neither efficient, nor rational.
> those residents could have an easier saving up money themselves
In desirable property markets, people bid against each other as much as they can afford to pay for a mortgage - so your cause and effect is wrong - most people don’t get to save. Same analyses if renting, because landlords and renters do much the same behaviour. You get to save if (a) you are an undesirable market or time, or (b) your wages are enough to beat the majority, or (c) you stay in a lower status home compared to your peers.
People bidding whatever they can afford is largely a lack-of-supply problem, is it not? If more housing of a given status level were available, eventually it wouldn't be necessary for everyone to spend everything they can on bidding wars. And sure, then you might say "well then the relative status of that housing has shifted and your peers still aren't saving, they're just spending their money on nicer housing", but I still see that as an absolute win. I have much more empathy for a person not saving money when saving money means "living in a dump and commuting 90 minutes each way" than when it means "living more than half an hour away from Central Park".
> People bidding whatever they can afford is largely a lack-of-supply problem, is it not?
ECON101 thinking. Tokyo is given as an example of enough supply, but something like 25% of the nation lives there, and Tokyo doesn’t have the same pressure of young working age people moving as other countries due to their aging population. Imagine even 10% of the USA moving to New York, and say 20% of all 2x year olds per year. How does NY double or triple the number of residences?
And as you say, status drives prices. In Christchurch we have a desirable suburb Merivale, where people bid rediculous prices because it has money status. The exact same house in another suburb, closer to town, can be a lot cheaper.
In NZ people want their kids to go to high decile schools. A high decile school is one where the parents are in the top 10% of earners. There is natural price discrimination working in the housing market to keep prices just barely affordable at every wage.
In New Zealand and Australia we have major cities where houses are 10x earnings, bigger multiples than most of the USA, and you will be surprised how much more US house prices can go up. New York doesn’t make the top ten list for unaffordability in the world: https://www.visualcapitalist.com/least-affordable-cities-to-...
New Zealand’s major city has 20% of the country’s population, and is also ridiculously expensive compared to household earnings. I wonder how many more houses it needs before prices would drop?
We are building new houses at a fucking insane rate in Christchurch (lag from Earthquakes a decade ago) - yet prices are still chronically hiking.
NY is very dense, yet prices are very high, so it breaks ECON101 assumptions since prices must have gone up as density went up. One theory is that houses are Veblen goods - which totally fucks with supply/demand curves.
> The high prices for small condos in urban centers are an indication that there are fewer of them in supply relative to what the market demands.
Here's a simple fact. Densification never leads to lower prices. As you build more housing, it _always_ becomes more expensive faster than you can build it.
I analyzed the database of all real estate sales in the US for the last 25 years, and I have not found a single example where densification led to price drops. Other scholarly literature found similar results, at most you can expect single-digit percentage drops on rents from new construction.
> There's nothing wrong with letting urban centers densify
Yes, there is. Densification forces jobs to migrate to urban centers, because companies in dense cores have a competitive advantage in the access to a larger pool of talent.
So your choices are:
1. Densify to hell and then in a couple of generations your children will live in apartments where you can shit into your toilet, while cooking food at the same time. See: microapartments in Tokyo.
2. Limit density and promote suburban lifestyle.
That's it. It's not a false dilemma, there are really no in-between choices that are stable long-term.
You have the cause and effect reversed. Areas densify because they become more expensive. This is the classic “more medicine causes higher mortality” Simpson's paradox.
Edit: Also, looking at one country for less than a generation is not conclusive enough to make a general rule.
> You have the cause and effect reversed. Areas densify because they become more expensive.
The thing is, with Simpson's paradox you'd expect at least _some_ inversions. You'll have at least _some_ people who are eating a lot of medicine and not dying.
There are _no_ examples of higher density leading to lower prices in the US. This strongly suggests a causal relationship.
And some examples are rather extreme. The number of units in Seattle has been growing by about 2.2% YoY for the last ~12 years. This is already at the upper range of the possible construction rate. Yet Seattle's price growth curve has been basically mirroring SF.
> Edit: Also, looking at one country for less than a generation is not conclusive enough to make a general rule.
I don't have data for more than 25 years and for other countries. And probably you can find counterexamples somewhere in Brazil.
