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277 sats \ 11 replies \ @justin_shocknet 22 Aug \ on: "Housing prices are not high by any historical standard" - evoskuil econ
He's got people arguing data scope beyond the sheep bleeting "home prices as a multiple of wages", and is right in doing so.
Can't be sure if he's nominally right, because it's an endless loop of what data is legitimate to call into in scope. Getting mired in those specifics is a fools errand.
If he were simply to say "people that compare home prices to wages are retarded" then he'd be absolutely 100% correct because those same people would blame fiat, meanwhile:
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Disagree with your framing. Gold is fixed supply --- why should we want housing to act like something with fixed supply?
Trying to downplay that as somehow natural is wrong. The lack of housing is a policy failure, not comparable to the price dynamics of gold.
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It's not my framing, it's reality. Home prices are flat in "real money" terms.
Real estate is fixed supply, god quit making land a long time ago, yet the population is increasing that needs to live (and eat) on it.
Given that, and the cost of housing being flat, that's a miracle of market efficiency in land improvement. Home values are largely a product of the land it sits on, not the sticks it's built with.
So what we have is completely natural, costs are a mix of the thing we can't produce (land) and the things we can produce (wooden boxes, earthwork). Coming out in wash despite population growth is pretty amazing actually.
If there's a grievance to be had, it's that wages pay less gold ("money") than they used to. This too is completely natural, why should labor have the same value it did before technology was invented to obviate that labor?
Would we really want to return to an era where it took 100x more workers to farm the same acreage of land just to keep wages high? We'd starve to death.
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Would you agree that regulation artificially increases the cost of housing?
And, if so, would you agree that without such extensive regulation as is present in US and EU cities, housing would likely be (even) cheaper?
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Without being too precise, yes... the incumbent power will always fight entropy and lower prices are entropy. More efficient manufacturing should make housing "units" cheaper but I don't think it has a material impact on land prices in real-terms.
I'd also tell anyone looking for housing never to buy anything that's not a homestead that can be productive or premium waterfront, those are hard money.
If you want to live in a box on shared land, rent and hold bitcoin.
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What I'd really like to see are numbers that take land distortion out of the equation to the extent possible. That would necessitate controlling for density, like only comparing unit costs in a class of multi-family structures, you'd probably then have to look at the rents as a percentage of wages and not the assessed value of each unit.
That'd probably be a nightmare to gather data for though.
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The amount of land is hardly the constraint. The constraint is the amount of land which is allowed to be developed for a certain purpose, or the amount of structure that is allowed to be built on the land. The market for real estate is heavily distorted by regulations.
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That's a different set of goalposts and doesn't change the fact that housing prices are flat over time. By that measure Eric is 100% correct.
Now, to take the argument that housing should be cheaper than it is seriously, people need to quit whining about boomers sitting on equity-in-fiat terms (reality is that they're still down bad in real money terms).
In that much different conversation I'd agree with you completely. Government is what stands in the way between land-poors and this:
That would segue into a whole conversation about the nature of government, the shadow government, how the world actually works, and why Eric is correct to be adversarial in his thinking. To disagree with him on this, I assume in his view, is to be distracted by false narratives and therefore ineffective in achieving the greater goal.
A resourceful tact would be getting his insight on what he'd consider an effective path for lowering housing costs in the face of an incumbant power working to prevent it.
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Thinking about this more because its an interesting problem, to say land is hardly the constraint also ignores how regulation fits into this equation...
You can get cheap, largely unregulated land, and put a mass-produced box on it and not impact anyone else. In that context, regulation is not a factor in prices any more than it is in anything else that consumes energy to make.
But, people looking for housing generally don't want to put their mass-produced pods in the middle of nowhere New Mexico.
There's a network-effect element to housing which is why regulation is largely a local thing as land-use is just one part of the equation. If you added a million more pods stacked on top of each other in an existing city (network) you have additional burden on things like roads, sewer, water, electricity and so on... and most importantly, on the job market which effects the ratio of wages to housing costs. Housing costs would go down in that scenario in that city but presumably so would wages.
So, when buying housing in an existing network (city as opposed to a desert) you're consenting to a covenant, with regulation being the spam filters.
Through that lens, it's not the price of housing that is high in cities, but the price of using the network in a marketplace of free association. Every city is a citadel, poorly governed as they may be.
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It's not the price of housing that is high in cities, but the price of using the network in a marketplace of free association.
I think it is possible to make the argument that the value of such networks has increased over time (you can make more money/have a better quality of life living in a city now than you could 30 or 60 years ago).
How would such an argument explain the generally higher housing price in all counties in the West (even those that are rural)? I suppose the network in such cases might be the state as a whole, but I wonder what network effect I get by living in the middle of nowhere Olympic Peninsula that I don't get living in middle of nowhere Iowa.
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Indeed, and I think this also ties in to what I was saying about fewer workers needed to work the same acreage in rural areas, the inverse would be true of the relative demand for knowledge workers increasing the value of cities. Aging population is a factor as well, older people are less capable of maintaining real property and need to be closer to healthcare resources that scale in population centers.
I'd think the disparity in the west coast vs. the mid-west is a combination of factors, there's still economic network effects in Oregon because you're in relative commuting distance to major economic hubs in California and Washington... as opposed to Iowa you're even further away from 3rd rate mid-west cities that aren't even a red fleck on that map in their own right.
Also if you have the the money to choose, would you rather live in the tundra of Iowa, surrounded by flat monoculture and truck stops, or have mild winters (lower heating bills) surrounded tall pines, mountains and coast, of Oregon? That gets back to some land being hard money and other land being a commodity, the network effects of either compound on themselves.
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