[majormajor]

How does saying that demand increased more than supply reduced in 2020 contradict the idea the the overall size of supply in in-demand parts of the country is lower than the overall size of demand in those areas? Like, if you look at 50-year price histories in SF or LA, how can you conclude that supply has kept up with demand?

I think we've now just seen that same pattern catch up with more places. I know people in Austin and Houston who were complaining that prices were already getting too high before 2020. That's where the folks priced out of CA were going even then.

[vannevar]

I don't know the LA market, but there is a scenario where both supply and demand could remain constant and yet housing prices could still rise, and that's if the income of housing buyers rises. And if the income rises disproportionally, then buyers with relatively lower income can become displaced by higher income people buying additional homes to rent. Even though base demand remained the same, and supply in the sense of actual houses remained constant, a relative scarcity was created by the inequality in purchasing power between the wealthiest buyers and people lower on the income scale. And this can happen even if the lower income tier has actually increased its income over time, simply because it hasn't increased at the same rate as the wealthier segment.

[majormajor]

If I'm following, this scenario is basically "as the higher income/wealth people invest more of their money into more property, prices and rent can both continue to increase even if demand is fixed until the lower-income people are spending 100% of their disposable income on rent"?

Which is not entirely dissimilar to the general discussion around gentrification - those who can afford to pay more can displace those who can't - but a sort of special case that doesn't require migration.

Seems like there would be some sort of game theory aspect - this only works if something close to every landlord is pushing prices up?

I think what we're really seeing is more the high-migration "gentrification" case yet applied to populations that normally aren't who you think of as being the ones on the receiving end of gentrification: the 100M-dollar-buyers are pushing out the 10M-dollar-buyers are pushing out the 1M-dollar-buyers from California and then they go to Texas and push out the 500K-dollar-buyers... and it continues to flow out to touch everyone else too.

[solaxun]

I think the point is that given typical demand, the amount of supply would have been sufficient to not cause meteoric price increases. Demand exploded due to incompetent monetary policy driving a speculative mania, and that demand was what gave the appearance of a supply constraint. Until recently housing starts were at a 10 year high, and they are still on the higher-end of the past decade: https://fred.stlouisfed.org/graph/?g=Rzky

[majormajor]

But Covid was just a blip in a decades-long trend.

I wouldn't argue that two years of insanity will correct itself.

But that doesn't mean the overall housing market is going to go anywhere but "still up and up" in most major US markets.

Austin median price in January of a few years (from https://www.recenter.tamu.edu/data/housing-activity/#!/activ...):

1990: 71,000

2000: 132,872 (+87%)

2010: 174,386 (+31%)

2020: 305,000 (+74%) (pre-covid, January 2020)

2022: 476,000

That 2022 number ramped up hard over that 2020 one, but that overall trend is still nuts. Even with the huge bust towards the end of the 2000s the decade ended well up.

Inflation calculator here (https://www.usdinflation.com/amount/305000/1990) tells me 71,000 in 1990 would otherwise be worth 156K today, so housing has been getting more expensive more quickly than most things for quite a while.

That's a supply issue (EDIT: or total market/policy failure creating an artificial one. Or at least a "construction issue" - you might say the population increase means its a demand one instead, but on this time frame... it's a failure to not serve the continually growing population.)

[__derek__]

It doesn't contradict that. The paper looks at the national housing market, which ignores individual market dynamics. Supply constraints still exist, but they don't explain the national increase in housing prices over the last 18 months.