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Agree - it's the 'Trickle-down Effect' except with property instead of wealth.
by eliasmacpherson 3y ago
Agree - it's the 'Trickle-down Effect' except with property instead of wealth.
- TulliusCicero 3y agoNo, it's just basic supply and demand.
- eliasmacpherson 3y agoA definition of demand: Demand is an economic concept that relates to a consumer's desire to purchase goods and services and willingness to pay a specific price for them. The poor do not have the willingness to pay a whole category of prices, as they are unable to finance it. Creating luxury accommodation can increase supply, but as the decrease in price does not necessarily put the older accommodation within reach, the owners of captial can choose to retain it.
- watwut 3y agoUndesirable areas are full of cheap mansions, slowly decaying because no one wants to live in a place with no jobs. Housing is not that special, when there is a lot of it, it gets cheap.
- eliasmacpherson 3y agoNobody with enough capital to buy/rent them wants to live there.
- ecshafer 3y agoIf there are 10 houses available and there are 12 families looking to buy then the they will bid up and the 10 wealthiest families win. If you build 2 luxury homes, it doesn’t matter if poor families 11 and 12 can’t afford them, because 1 and 2 can, which makes them not bid on normal house 1, 2, …, n lowering all housing prices.
- eliasmacpherson 3y agowhy do you assume a wealthy family will only buy one house, or could be outbid by a poor family?
- steveBK123 3y agoAre things made better or worse by building the 11th & 12th houses when there are 12 families in need of houses?
- eliasmacpherson 3y agoMade better, in that case with those numbers. Given rental vacancy rates of ~5.8% in the USA in 2022 it is more akin to a hypothetical of building a 12th and 13th house, while an 11th already lies unoccupied. I am not sure in this more realistic case that building improves matters, unless an unhoused family can gain access to one.
- steveBK123 3y ago1) You can't take national vacancy rates, RE is extremely local, as is homelessness. 2) Is it easier for unhoused to gain housing when vacancy is 1%/5%/10%/20% ? For example, Manhattan has 2% vacancy. Even in peak covid dread it never got much above 4%. And you know what - pricing updated very quickly to get those units filled. Lots of tales of people getting crazy deals, including people I know. Of course when the world was no longer ending & everyone moved back.. prices snapped back. So even a 2% to 4% move can have huge pricing impacts. Imagine building enough in HCOL areas to move the needle.
- eliasmacpherson 3y ago1) can you explain why I can't take national vacancy rates, as it was a hypothetical in response to an unrealistic hypothetical? Surely national averages are better than looking at Manhattan of all places? I don't know how to have a reasonable conversation about this global problem using Manhattan as the point of interest. 2) at a certain point squatting sets in. I believe the answer to your question depends on how much capital is held by the rich/poor, and how well property is protected by law enforcement and private security. If you look at the parent comment I was responding to, it mentioned not building so much that it flooded the market.
- xkcd-sucks 3y agoFor every "basic supply and demand" there is a "markets can remain irrational longer than you can remain solvent"