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