I mean, the reason I convey such a meaning is kind of exactly why we're having this discussion, which is people often have different (hidden/underlying) assumptions (which they take for granted), and conversations don't go anywhere because of it. No one does this intentionally, everyone makes and holds assumptions, but it's important we all hold the same ones if we want to come to an agreement. That's all.
Anyways, as what I meant about building more houses...
You can see elsewhere in this thread that people disagree on whether or not the core issue is that we have a shortage of houses. Some people are holding the assumption that, building more houses will increase the inventory for sale, and therefore help prices. Good old supply/demand. That's a perfectly rational assumption, and I don't necessarily disagree, but like you note, new construction is costly...
Additionally, as data given above (and elsewhere) indicates, housing per capita in 2022 is similar or better than in 2011 for many markets, but as we know, prices (even adjusting for inflation) are higher than 2011. From the theory of supply/demand, this suggests some degree of hoarding is happening, but as to how that is happening is not certain, as people could simply be living with fewer people than the past, or people could be living more or less the same amount people and investors are more of the ones who are buying up new construction. If the latter, then that new built construction might not really be for sale if you get what mean, as investors may simply rent it out or use it as a seasonal. Hence why I said "building more supply won't help if it is never for sale".
Now of course everything is for sale, just a matter of price, but who does cheap credit / inflation help more, people with assets or people without assets? That's right investors. And, given vacancies are higher than inventory for sale, I just have a hard time finding support for the idea that the core issue is that there is insufficient houses and we need to build more. The only reasoning for it seems to be the idea that more supply = lower prices (an idea which falls apart if it is simply hoarded). But of course, that's not to say, that many markets likely do need more supply, just that it doesn't seem to be the fundamental issue.
> Hence why I said "building more supply won't help if it is never for sale".
It doesn't need to be for sale to help with the situation, of course. It still relieves pressure on the demand side. An individual can never afford an infinite number of houses. Even if someone is, as you say, hoarding houses, at some point the last house they build will be the last house they can own and then they drop out of the demand side of the equation.
> who does cheap credit / inflation help more, people with assets or people without assets?
Whomever finds opportunity in it, I suppose. Same as always. Someone sitting on cash assets will be worse off (after all, that's what inflation is: a devaluing of a currency), while someone with no assets can leverage the situation to build real wealth. Even the job market tends to improve in a cheap credit / low inflation environment as businesses use that to chase more labour-requiring opportunities, which is a boon for those who have nothing. There is no one answer here.
It doesn't if it's sitting there, with no one really occupying it, and priced out of the free market's reach. You're assuming a competitive free market is always determining the price here. That's another thing people don't understand, the theory that supply/demand fully determines prices again assumes a perfectly competitive market, which is almost never the case in reality, especially in places of low liquidity. (keep reading if you don't know what I mean).
>An individual can never afford an infinite number of houses
But there is still someone who practically can afford an infinite number of houses - those closely tied to the infinite money printer. Banks are deemed "Too big to fail". Take the SIVB failure for example, yes they failed, but the assets did not and got absorbed by other big banks. Just because those assets changed hands, doesn't really change anything in the grand scheme of things. I mean hell... there's a $25 million dollar estate with a private horse track and an observatory tower near where I live, whom locals are very familiar with, which has been vacant for 25 years ever since it was built. No one has ever lived in it. I happened to meet a greenskeeper at a golf course who happens to maintain it a while back. Who is paying his salary for maintenance? The banks. How can they afford to perpetually maintain those costs? Well, when they struggled like in 2008, they got bailouts, and the assets were never sold at whatever the market would bear. So the banks just sit on it, maintenance costs just get tacked onto the price or onto the banks customers over time, and if shit hits the fan, they'll get absorbed by another bank, and they'll just sit on it until hopefully someday someone will pay the price. It's technically for sale, but if the price is set by the bank and outside what demand for it actually is, its price is not really being determined by a competitive free market.
And that seems the case in a lot of places. I mean Miami has some of the highest vacancy rates in the US, but median price is like $660k, which is also amongst the higher end in the nation. China has 65 million vacancies, and literally multiple ghost cities where there is like a few dozen people living in skyscrapers, but prices are still sky high. There's a Toronto man who owns 30,000 houses. The US has just under ~15 million vacant properties, but housing inventory for sale is ~ 1.2 million.
I mean... I don't disagree that more supply is badly needed in some places, or fixes to zoning, but how does this not look like what the top post mentioned as the core underlying issue: underutilization of housing, and cheap credit creating an asset bubble virtually around the world? It just seems to me we do in fact have supply in many places, it's just no one is really being forced to adhere to the principles of supply/demand, due to cheap credit.
> It doesn't if it's sitting there, with no one really occupying it, and priced out of the free market's reach
It does. Reiterating: Supply and demand, not just supply. When someone builds a house and keeps it for themselves, occupied or not, that is "one less demand" for a different house. Not even banks want to own an infinite number of houses.
> price is not really being determined by a competitive free market.
What difference does that make? Supply and demand says nothing about competitive free markets. Hell, supply and demand is just as applicable to socialist command economies and everything else you can imagine. Supply and demand is even observable in animal populations. It is considered a law, and not in the legal sense, for good reason.
> When someone builds a house and keeps it for themselves, occupied or not, that is "one less demand" for a different house. Not even banks want to own an infinite number of houses
Not necessarily. Are you saying that if I demand to have $1 and keep it for myself, that is 1 less demand I have for different dollars? Seems to me I can still have demand for more dollars. In practice, there may be a point where I don't have demand for more dollars, but I don't see why demand could be unlimited. Are you implying prices have a theoretical maximum? Like $1000000000000000 and once that limit is reached, prices could never go above that?
> What difference does that make? Supply and demand says nothing about competitive free markets. Hell, supply and demand is just as applicable to socialist command economies and everything else you can imagine. Supply and demand is even observable in animal populations. It is considered a law, and not in the legal sense, for good reason
The difference matters when it comes to determining prices. Again, when it comes to prices, the law only holds true under certain conditions: competitive free market conditions. If the economic environment is not a free market, supply and demand are not influential factors when it comes to prices. We already discussed this above. In socialist economic systems, the government typically sets commodity prices regardless of the supply or demand conditions. In which case, if the price set by the socialist economic system (or monopoly) is higher than the price determined by what supply/demand for it really is, it is essentially being hoarded, and thus not for sale.
> Seems to me I can still have demand for more dollars.
Only to the maximum capacity of your ability to fulfill the wishes of other people. A dollar is, after all, an IOU. For someone to willingly give you an IOU, you have to give them something first. While a single dollar may not satisfy you, there is an eventual limit to how much you can meaningfully give. Of course, as IOUs can be traded, the value is also subject to the properties of supply and demand.
> The difference matters when it comes to determining prices.
That's fine. The law of supply and demand isn't some kind of enacting force. It is not a law in the legal sense, if that is where you confusion lies? It is an observational law. The observation does not concern itself with the exact mechanics of how the price is determined, it merely notices the relationship of price as a function of supply and demand.
> the government typically sets commodity prices regardless of the supply or demand conditions.
And you will notice that the law of supply and demand still holds.
> For someone to willingly give you an IOU, you have to give them something first
Not necessarily, someone can just hand me a dollar for nothing in return.
> While a single dollar may not satisfy you, there is an eventual limit to how much you can meaningfully give
Agreed, that limit is what total supply is.
> It is an observational law... it merely notices the relationship between price as a function of supply and demand
Agreed.
> But you will notice that the law of supply and demand still holds. This idea that supply and demand only applies in a competitive free market is completely unfounded
Yes, it still holds from the perspective of what's actually being traded. But notice it's possible to withhold something from being traded. The stuff withheld is not priced according to the law. However, the price of stuff which is still being traded, still is.
> Not necessarily, someone can just hand me a dollar for nothing in return.
Value is certainly subjective. While it is possible you might find someone seeing a dollar as being worthless, just as they might give you a house for nothing in return, I don't expect you will find that to be scalable. If you have a thirst for all the dollars you can get your hands on, you are bound to go thirsty relying on this.
> Agreed, that limit is what total supply is.
There is a limit on supply, but also a limit on demand. That's why we call it "supply and demand", not just "supply". In a "normally functioning" market, demand actors start to drop out of the market as price rises.
In fact, you can see this happening in the housing market. A lot of people can't afford a house, so they are no longer participants in the housing market. They may still wish to own a house, but that's not demand, that's dreaming (or what you might call latent demand).
Hence why a shortage occurs when price is unable to rise. When price is unable to rise, there is no price-based mechanism to see that people leave the market, creating a situation where "demand exceeds supply". Which is why you will typically see alternate mechanisms step in instead, such as a lottery, or offering on the basis of first-come, first-served, to force people out some other way. A medical doctor with an ethical, and often legal, obligation to not allow price to rise is apt to use a needs-based mechanism, serving the patients in most need of care ahead of the richest patients with the common cold. That's certainly not the case in the housing market, though. Price is most definitely able to rise – demonstrably so.
> But notice it's possible to withhold something from being traded.
Of course – at which point it ceases to be supply. Just like, as above, it is possible to withhold on the other side of the transaction, at which point that ceases to be demand. This is exactly what the law of supply and demand describes.
> They may still wish to own a house, but that's not demand, that's dreaming (or what you might call latent demand)
Again this is a matter of where you draw your boundaries. Latent demand is still demand which exists just demand withheld from the market (ie priced out).
>Of course – at which point it ceases to be supply
But it is still supply which exists, just supply which is withheld from the market (ie not supply for sale). This is why I made the point of "supply" and "supply for sale". You're never going to help home prices by building more houses, if what you build is withheld from the market, because, if we use your definition of supply:
> Again this is a matter of where you draw your boundaries.
Just as with the boundaries of what shape the earth is. If you want to consider it flat, good on you. But if you want to talk about the law of universal gravitation, you'd better be prepared to accept that the earth is approximately a sphere (at very least, toroidal). Otherwise you are contradicting yourself.
> Latent demand is still demand which exists just demand withheld from the market (ie priced out).
It exists in the world where the price is lower. It does not exist in the world where the price is higher. That divide is what supply and demand observes.
The law of supply and demand says: When the price of a good or service falls, there tends be less willingness to sell said thing (decrease in supply) and when the price of a good or service rises, there tends to be less willingness to buy said thing (decrease in demand). Likewise, when the price of a good or service rises, there tends to be more willingness to sell said thing (increase in supply) and when the price of a good or service falls, there tends to be more willingness to buy said thing (increase in demand).
That's it. Not exactly groundbreaking. If you've ever stepped outside, even if only in Soviet-era Russia, you probably already reached the same independent observation. Why you think you need a "competitive free market" for that to stand is a head scratcher.
> But it is still supply which exists, just supply which is withheld from the market
It is something that still exists, but it is not supply as the law of supply and demand considers it. If "supply" was all things out there in the world, and equally "demand" every last wish someone has for something, we couldn't talk about supply and demand. It fundamentally could not be a concept. So what is it that you do think we are talking about?
Anyways, as what I meant about building more houses...
You can see elsewhere in this thread that people disagree on whether or not the core issue is that we have a shortage of houses. Some people are holding the assumption that, building more houses will increase the inventory for sale, and therefore help prices. Good old supply/demand. That's a perfectly rational assumption, and I don't necessarily disagree, but like you note, new construction is costly...
Additionally, as data given above (and elsewhere) indicates, housing per capita in 2022 is similar or better than in 2011 for many markets, but as we know, prices (even adjusting for inflation) are higher than 2011. From the theory of supply/demand, this suggests some degree of hoarding is happening, but as to how that is happening is not certain, as people could simply be living with fewer people than the past, or people could be living more or less the same amount people and investors are more of the ones who are buying up new construction. If the latter, then that new built construction might not really be for sale if you get what mean, as investors may simply rent it out or use it as a seasonal. Hence why I said "building more supply won't help if it is never for sale".
Now of course everything is for sale, just a matter of price, but who does cheap credit / inflation help more, people with assets or people without assets? That's right investors. And, given vacancies are higher than inventory for sale, I just have a hard time finding support for the idea that the core issue is that there is insufficient houses and we need to build more. The only reasoning for it seems to be the idea that more supply = lower prices (an idea which falls apart if it is simply hoarded). But of course, that's not to say, that many markets likely do need more supply, just that it doesn't seem to be the fundamental issue.