[supermw]

God forbid anyone make a profit?

I’m not sure what your point is, prices are set by what the market is willing to pay. Anything else is not sustainable.

You are not entitled to buy houses wherever you want for whatever price you think is good. Certainly not in the Bay Area.

[TomMckenny]

>prices are set by what the market is willing to pay

Land is not a normal good so it does not work that way even in theory. A simple example: Flint MI has falling demand and rising prices.

In addition, land is used both for speculation and retirement savings, further inflating the price beyond just being a place to live.

>Anything else is not sustainable

Correct. An ever growing percentage of wealth will go to land owners and rent seeking rather than productive enterprise. The price of doing business in the Bay Area (and similar cities) will drive out industry until there is nothing but the top most classes and their house cleaners, gardeners, waiters and store clerks. A situation perfectly satisfactory for land vendors.

It has happen countless times in the past but apparently were not going to let facts interfere with economic theory.

>God forbid anyone make a profit?

For producing something profit is great. For an exorbitant toll both in the path of job seekers, it is a net harm.

[vinceguidry]

> Land is not a normal good, it does not work that way.

You are right in essence, but using the wrong terminology.

Real estate, at least the kind we're discussing, residential housing, absolutely is a normal good, normal being defined as having a positive income elasticity of demand. Simply stated, when people make more money, they want more house.

https://en.wikipedia.org/wiki/Normal_good

The supply side of the equation, what you're referring to, is less straightforward. While, the long-run price elasticity is pretty high, the short-run tends to be fairly inelastic, this is due to construction having lots of high, fixed costs, and financing tends to have very long amortization schedules. Do a lot of construction in a real estate market and it might be ten years before prices start to come down, assuming demand hasn't caught up in the interim.

Most real estate markets clear. Failure of the market to clear can have many causes, the one I see happening most often is the aforementioned low price elasticity in visible parts of dense downtowns. Political action at the local level can create an economic incentive to reduce prices to meet demand.

https://en.wikipedia.org/wiki/Real_estate_economics

[TomMckenny]

I see I also blurred construction costs with land costs and new housing with existing stock. I probably should have been more precise and less rhetorical.

But yeah something like moving zoning decisions to State level and financial incentives for development vs under developed parcels would help.

[EpicEng]

I believe the GP's point is that regulation geared toward limiting supply circumvents natural market forces.

[enjo]

You can see it in the data:

https://fred.stlouisfed.org/series/HOUST

We're in a market in which housing prices have been soaring for a very long time, but for most of this we've been building less housing than even the 90's (and starts have actually FALLEN recently).

There's something broken in the market. Material costs are part of it, but government regulation is certainly part of it as well.

[oftenwrong]

More accurately, it exploits natural market forces.