[snidane]

Housing is a special story. It doesn't behave according to the standard economic theory of equalizing supply and demand like yogurts or bananas.

Housing is strongly inelastic market, meaning you can't increase supply when there is demand easily

The market is essentially stalled. It doesn't 'clear'. People would rather keep it idle out of the market than rent or sell under price. On top of that it has entered a bubble territory recently in which people buy, not based on their value judgment of the property, but because they expect to offload it to someone else in the future with a profit.

Housing is not a 'supply and demand market dynamic, but a 'greater fool' market dynamic.

[koolba]

Housing in CA is also unique in that the combination of refinance rates and Prop 13 make selling your home for the same house right next door a losing proposition. Most long term owners are deeply incentivized by CA’s property tax cap to never sell and if anything take an equity loan / rent it out.

I can’t even imagine the total financial devastation if they suddenly ratcheted up the tax rates via reassessment. It’d be a fire sale for all but the top end of the income ladder.

[pcwalton]

> The market is essentially stalled. It doesn't 'clear'. People would rather keep it idle out of the market than rent or sell under price.

This theory fails to explain why housing prices in San Francisco fell during the dotcom bust. https://www.bayareamarketreports.com/trend/3-recessions-2-bu...

[resonantjacket5]

Housing is not actually that special. It is true it doesn't behave according to the econ 101 model that most high schoolers learn in class, but in econ 201+ classes explain it.

The main difference is that land is the limiting factor or more accurately legally buildable land in this case with zoning.