[JumpCrisscross]

> evidenced by simultaneous price increases across jurisdictions with vastly different zoning laws

“Only in particular areas, especially New York City and California, do housing prices diverge substantially from the costs of new construction. The bulk of the evidence examined indicates that zoning and other land use controls are responsible for prices in high cost areas of the country” [1].

Inflation has raised construction costs; climate change the cost of homeownership. Beyond that, it’s almost all zoning.

> rapid price changes following interest rate shifts

Prices didn’t fall when the Fed spiked rates. The monetary-first hypothesis for housing requires epicycles to gain explanatory power over zoning.

Our housing crisis is a political choice.

[1] https://realestate.wharton.upenn.edu/working-papers/the-impa...

[sokoloff]

Prices didn’t fall as much as a simple model would predict, but sales volume fell a lot. IMO, that was driven by sellers withdrawing from the market, because they weren’t willing (or perhaps able) to sell for what buyers were able to qualify for mortgages to pay.

https://tradingeconomics.com/united-states/existing-home-sal...

There is also a zoning and policy effect, of course, but it’s a mistake to think that mortgage rates do not inversely influence transaction prices.

[JumpCrisscross]

> Prices didn’t fall as much as a simple model would predict, but sales volume fell a lot

Sure. Anyone running a pricing model and not considering refinancing costs for marginal sellers—and financing costs for marginal buyers—isn’t describing reality. (Refinancing dynamics are heavily studied.)

> also a zoning and policy effect, of course, but it’s a mistake to think that mortgage rates do not inversely influence transaction prices

Nobody said they don’t. Just that the effect isn’t meaningful compared to zoning. The monetary hypothesis seems predicated on the effects of rates on home prices being symmetric, i.e. if low rates caused prices to go up, by enabling buyers to borrow more quickly than builders could borrow and build, high rates should do the inverse. But symmetry isn’t required in economics, e.g. wage stickiness.

There are a bunch of reasons why monetary policy didn’t flow through to pricing. We can debate that fruitfully. What shouldn’t be debated is that it hasn’t. Raising rates won’t fix this problem because it hasn’t. Fixing zoning will. (Do we even have an example from abroad of a housing crisis being fixed with monetary policy? Versus directly manipulating supply and/or demand?)

[lumost]

Construction cost may be a poisoned data source, does it take into account real estate purchasing costs? Or do individuals only build when they can afford a home at a price point greater than the 75th percentile home price in metros?