Thanks for posting the Blackstone link, very helpful.
While I think it's easy to demonize the investment companies (and there is plenty of evidence that in certain markets that non-resident investors drove up the price of housing considerably), basically everything I've read has said that, at it's root, the problem is just a huge undersupply of housing.
My question is: what is the real root cause of that? I know people talk about NIMBYism and regulatory capture, and that is most definitely a factor, but NIMBYs wanting to restrict additional housing has existed for many decades - why is the problem so acute now? Plus, the housing shortage is present in lots and lots of different countries with widely varying housing policies and demographics. Is it all just a consequence of the Great Recession hangover of under-building new homes?
My personal theory is that it's not so much a total broad-based underinvestment in housing, but it's that the economy has further concentrated wealth into fewer and fewer metropolises while many rural areas have hollowed out. E.g. you see depressed rural "ghost towns" in places like Japan and the US, and then you have famous examples of Italy selling old houses in villages for a euro. Thus, in many of these depressed locales, land is near free because nobody wants to live there, but prices in urban/suburban locales have gone through the roof because more people are congregating there.
That's just my pet theory though, I haven't really tried to back it up with hard data. I'm curious if anyone else has more evidence of what's driving the global house price insanity.
This pattern is broadly similar everywhere, where there may be older, denser buildings in a neighborhood but new ones cannot be built because the screws have been tightened over time, parking requirements have become more strict, etc. The opposite should be happening, you should be allowing more capacity as the current capacity is used up to maintain supply.
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There is also the fact that in a lot of areas that stopped building housing in the US, they pretty much reached out as far as you could get from city center by driving as a reasonable commute, so building ever more single family homes became significantly less desirable or possible. Now you hear people with crazy commutes like Stockton to San Francisco, nearly a 90 minute drive at 133km, but that is not really going to work out for most people.
Thank you, excellent insight! Yes, the other "feeling" I've had is that over the past 20-30 years basically the vast majority of land near urban areas was "filled up" - e.g. you could no longer sprawl out or take over farmland, so additional housing growth meant higher density in pre-existing neighborhoods, and we've all seen how existing home owners fight tooth-and-nail to keep that from happening.
I think this quote from the article sums up how zoning and its purpose has changed over the years.
> The legacy 1961 zoning created an invisible city with a loose shape, like a dress bought a few sizes too big, that the physical city had plenty of room to grow into. The Bloomberg administration has left behind a building envelope that’s more like a corset, pulled tight to the city’s body, cinching around places that were already small and boosting its curves.
Money printing and bad economic policy. The government has printed trillions of dollars and injected it into the housing market, via guaranteed loans and loans directly purchased. All this money pushed up prices beyond what new supply could absorb (it takes time to build housing).
We have a similar market failure with higher education: easy money makes for high prices.
But how does that explain a fundamental undersupply of houses? That is, I've read from lots of different sources that the primary issue is more people needing houses than there is supply. I get how all the stuff you've mentioned pushes up the price of houses, but shouldn't that also spur a ton more home building?
I guess a better way to frame my question is "Why has new home building been far below the actual need?"
<< I'm curious if anyone else has more evidence of what's driving the global house price insanity.
Not real data, but like you, I have theory of sorts based on goals. And while affordable housing is a goal to some, even to sympathetic owners, some of the solutions hit their bottom lines when it comes to valuation, helocs and all that. In other words, the push to inflate prices higher is greater than the push to lower those.
While I think it's easy to demonize the investment companies (and there is plenty of evidence that in certain markets that non-resident investors drove up the price of housing considerably), basically everything I've read has said that, at it's root, the problem is just a huge undersupply of housing.
My question is: what is the real root cause of that? I know people talk about NIMBYism and regulatory capture, and that is most definitely a factor, but NIMBYs wanting to restrict additional housing has existed for many decades - why is the problem so acute now? Plus, the housing shortage is present in lots and lots of different countries with widely varying housing policies and demographics. Is it all just a consequence of the Great Recession hangover of under-building new homes?
My personal theory is that it's not so much a total broad-based underinvestment in housing, but it's that the economy has further concentrated wealth into fewer and fewer metropolises while many rural areas have hollowed out. E.g. you see depressed rural "ghost towns" in places like Japan and the US, and then you have famous examples of Italy selling old houses in villages for a euro. Thus, in many of these depressed locales, land is near free because nobody wants to live there, but prices in urban/suburban locales have gone through the roof because more people are congregating there.
That's just my pet theory though, I haven't really tried to back it up with hard data. I'm curious if anyone else has more evidence of what's driving the global house price insanity.