The finance side of things has also enabled a kind of house size inflation. Anecdotally, I’ve seen new tract housing go up in areas that need housing, which were all 3000 sq/ft each. They could have developed for higher density and sell more units, but I guess the margins are better on houses that sell for 700k and up. Especially if folks are willing to go into deep debt to pull it off. Plus that does little to ease demand, so the cycle can continue.
Comment on Housing prices
TheOubliette@lemmy.ml 1 week ago
According to the alleged dynamics of capitalism, housing prices should be somewhat flat. Build houses that are too big and expensive? Demand is down for that market subset, gotta drop your prices or stop making such but houses. Housing supply is low? Prices go up, so companies will build more housing to make money off of that, increasing supply and stabilizing prices!
So the dynamics are not working like that. Now of course real estate has a “natural monopoly” aspect, certain land is less valuable because it is just too hard to get to and from relative to what people need to do: work, eat, go to school. So land rents are higher in some places more than others because of this. Am economist might call this a distortion.
But there is a much more important aspect in the US and similar economies, and that is financialization. Some comments here say prices are very high because houses are treated as an investment. That is true, but also incomplete, and it might make you wrongly think that it is individual homeowners saying, “this house will be worth more later so I will buy it”. This is not enough! The financialization is by the bank that sells you a mortgage, that takes a nice percentage of your money in exchange. They can then make your house into a form of equity that can be seized later as needed if you’re not profitable enough, which they carefully calculate to decide on your initial interest rate. And then they can gamble on that equity on the market. That equity is only worth something if the actual house has value and it has value because they will still loan you that amount on a new house. So an individual home buyer might buy based on the ability to be financed, sure, and the expectation that it will be worth it. But this is only possible because the mortgage lender themselves sees it as profitable for them to do so. If those high mortgages were not available, nobody could buy the expensive houses, land values would plummet, and so would housing prices, etc. of course because the dynamic is capitalist, this would involve a massive disposession and immense suffering if done at their hands and potentially threaten mass organizing and a threat to real estate profits, so whenever that threatens to happen (like 2008) the state keeps finance (and therefore real estate) afloat with free money.
dejected_warp_core@lemmy.world 1 week ago
TheOubliette@lemmy.ml 1 week ago
Real estate development tends to be done on loan. Before the decision to buildi a house is made, it is pitched to the lenders. The lenders also lended mortgages for other houses in the area and own a few, they want values to go up. The lenders approve the more expensive developments expected to increase real estate prices, not the lower income housing. The lenders can always choose a different developer to give the money to, the one that will pitch the higher perceived value development.
HaiZhung@feddit.org 1 week ago
I think this is way too complicated, a much simpler effect describes the housing cost:
Wealth inequality drastically worsened over the last 40 years. The uber rich got even richer: while the vast majority of people has little to no money and can’t afford a house or other assets.
Rich people have (compared to their wealth) low consumer spending, but they massively accumulate wealth.
What’s the wealth spent on? Assets.
That’s why you see all the assets go up - stock market highs, gold price up, housing prices up, everything up.
It’s as simple as that. Rich people don’t know where to put their money except buying more assets, which drives their prices up massively.
Polisheocket@lemmy.zip 1 week ago
Where I live they don’t make starter homes, everything is 800k and up, 2,000+ sqft. People can live in 1,200 sqft and are good starter homes. Have them start at 400k (CA so everything is expensive)
HaiZhung@feddit.org 1 week ago
Yes and that is the logical conclusion of what I said above.
If regular people and families have no buying power, then houses that suit their needs will not be built. Rich people have buying power, so luxury apartments and suites will be built.
Polisheocket@lemmy.zip 1 week ago
It’s unfortunate, my uncle likes smaller places and he’s really struggling to find one.
NABDad@lemmy.world 1 week ago
A guy bought the property next to my house. He was going to tear down the house that was there, but our historic district stopped him. He had to restore that house and convert it to a duplex. Then he squeezed another house in the strip of land in between.
It is hideous. When my mother-in-law visited, she asked why they were building an office building next door.
It sold for $799,000.
Polisheocket@lemmy.zip 1 week ago
We had an investor do that to us, it was 3 houses down and built 3 units with no parking. Plus the house could look down in our pool and all other homes in the neighborhood were single story. Then they painted it hot pink. It was an eye soar
TheOubliette@lemmy.ml 1 week ago
Individual rich people don’t lend the mortgages, it is large financial institutions that do that and then use the equity to do even more gambling. Individual rich people own a few expensive properties, sure, but this accounts for very little of the overall residential real estate “market”.
But when nations restrict the financialization of housing, prices flatten or even go down.