tag:blogger.com,1999:blog-1110014885778996459.post2143535206814412377..comments2024-03-28T11:48:09.419-07:00Comments on Idiosyncratic Whisk: Housing: Part 152 - Incomes before and after RentKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-1110014885778996459.post-41465819537968549242016-05-31T17:49:16.296-07:002016-05-31T17:49:16.296-07:00Makes sense. And I think it's reasonable. Ca...Makes sense. And I think it's reasonable. Carrying on your biologist theme, it's not an exact science but you have reasonable/plausible/likely explanations for your platypuses (DC, Phoenix, etc.).Anonymoushttps://www.blogger.com/profile/01825189362145010513noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-35629141407751083272016-05-27T21:02:00.793-07:002016-05-27T21:02:00.793-07:00I think the evidence of the boom & bust sugges...I think the evidence of the boom & bust suggests that it definitely would fall substantially (though I agree it is unlikely to happen). You are applying demand-side logic to price levels, and surely, if I have demonstrated anything it is that supply reigns. Prices aren't high in California because of the quantity of buyers. They are high because the marginal buyer expects rent inflation to be elevated indefinitely. Expectations rule. The migration will probably mostly only reverse when rents, themselves decline, which would happen after substantial building. But, prices would fall first. In a realistic scenario, they would probably fall slowly as confidence in the new pro-growth regime increased.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-36287671047432086672016-05-27T20:09:17.965-07:002016-05-27T20:09:17.965-07:00I wonder if house prices could decline by much in ...I wonder if house prices could decline by much in CA, or would rather sink some and stabilize. Once housing prices started to drop, you would lose outmigration. If they "overbuilt" CA housing, I think people would migrate to CA, and you might see price collapses in Las Vegas, Phoenix, Riverside etc. <br /><br />It would be fascinating to watch. But, hey, ain't going to happen. <br /><br />Property zoning is not a PC-topic in right-wing or left-wing circles. Only a few oddballs ever talk about property zoning, and then you have some extreme left-field weirdoes who talk about decriminalization of push-cart vending.<br /><br />These are not topics anyone cares about. <br /><br />The minimum wage! Transgender bathrooms! Ted Cruz' girlfriends! Fallujah! Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-91850012861667432842016-05-27T12:12:17.551-07:002016-05-27T12:12:17.551-07:00The last graph in this post was sort of the germ o...The last graph in this post was sort of the germ of the idea for me:<br />http://idiosyncraticwhisk.blogspot.com/2015/11/housing-series-part-80-measuring-real.html<br />Up until 1995, the scatterplot is just a blob. Nothing to see. Then, psshhhhfff, there is this sudden explosion of high incomes/high costs, specific to certain metro areas. The signature was so extreme and unique. And, it seems to explain a lot.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-78564090795382263702016-05-27T12:01:03.324-07:002016-05-27T12:01:03.324-07:00Well, the thing with developers is that so much of...Well, the thing with developers is that so much of their business comes from local knowledge, so in their day to day operations, the larger problems of their metropolitan area might be secondary, even if it seems extreme to us looking at it from a macro level. So, as you say, a developer that has a peculiar idea about a certain neighborhood will not necessarily be dissuaded from that just because rent inflation expectations for the metro area decline by 0.5%. The problem is that that seemingly small shift in expectations has significant implications for the value of their property. I think we should be a little more forgiving regarding the rationale of the developers. These are difficult issues to account for. If the state of California ruled that zoning boards were illegal, I would expect home prices to drop 50% in San Francisco before a single foundation was poured on a new home. Expectations are powerful on a long lived asset.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-78318263113222803582016-05-27T11:54:38.526-07:002016-05-27T11:54:38.526-07:00Well, it's a good question, and I don't kn...Well, it's a good question, and I don't know if there is an answer that is objective. If a marine biologist finds a new species that's going to the surface and blowing air through a hole, she's going to think, "mammal". The thing that makes that useful is that "mammal" describes a series of unrelated and peculiar factors, like suckling, that would be a surprising thing to see on there own, but seem normal to us because they belong to a category of species that share it. So, sure there are some cities with high rents and prices, but they have a peculiar signature - very low permits, high prices, high incomes, out-migration of low income households even though local wages are high, etc. Here, Washington, DC, for instance, is the exception that proves the rule. They have all the characteristics, except rent/income remains in the normal range there, because housing restrictions aren't the source of economic rents in Washington.<br /><br />But, there is always the question of if I am just creating ad hoc rationalizations or if these categories have an organic justification. I think the reason this project has gotten as far as it has is because, once I developed the framework, I have found that it generally pushes me to expect particular contrary results when testing the conventional points of view about the bubble, which have overwhelmingly been confirmed when I check the data. But, again, whether I am being objective about that will be up to the readers.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-24357870124362301602016-05-27T10:26:56.403-07:002016-05-27T10:26:56.403-07:00A thought that only occurred to me today: Do you d...A thought that only occurred to me today: Do you define what makes a city Closed Access - maybe involving housing starts, or permits, population growth, and migration? I generally agree with the classifications you've given cities, but what's the response to "You have no way to measure what makes a city a closed access city and are just conveniently putting them into the categories that fit your narrative."<br /><br />Sorry if you've already done this and I missed it in a previous post.Anonymoushttps://www.blogger.com/profile/01825189362145010513noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-8321479430367260562016-05-26T19:56:50.628-07:002016-05-26T19:56:50.628-07:00There is no cure for high housing costs other than...There is no cure for high housing costs other than huge ramp-ups in housing supply. <br /><br />Builders want to build high-end housing. They will overbuild if given the chance! Believe me, give a developer money, he will develop, and he will always think his development will win (they are all men, btw). <br /><br />The solution is a 10-year moratorium on all property zoning and regulations, if the developer promises to build luxury housing. Anywhere in the US, in any city, including condos in single-family detached neighborhoods ringing cities. <br /><br />Then...short housing. You would see a real bust, not a manufactured, financial-noose-around-the-industry bust.<br /><br />Public Storage would buy apartments to serve a garages. <br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com