[spicybbq]

> Price Drops Don’t Lead to Supply. They Kill It.

Is anyone arguing that price drops "lead to" (i.e. happen before) increases in supply? It seems to me that it's the other way around: supply increases "lead to" price drops. This is what supply advocates hope to see in HCOL cities with expensive housing.

The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should respond to changes in prices.

Other policy goals are possible. For example, instead of "affordable housing", your goal might be to help the home building and financing industries never experience a down year.

[crazygringo]

> The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should respond to changes in prices.

Exactly this. Once you've built enough new housing and so the price has dropped to the point where it's not economical to build anymore, you're done. It's mission accomplished. The goal was achieved.

But the whole point is that you have to actually build all that housing to get there. Which is what we want. The author seems to be deeply confused about basic economic principles.

[bandofthehawk]

That doesn't solve the issue of housing being unaffordable to new buyers. How do you address affordability if the prices stop dropping before they reach a price at which an average young worker can afford to buy a starter home?

[bluGill]

We need to allow smaller houses such that people can afford to buy them then. Or we need to build apartments of all sizes so people can afford to rent them. The above is not an exclusive or - buying a house is a great choice for some and a terrible choice for others.

Affordable housing used to include a room where you share a bathroom and kitchen with the entire hallway. Affordable housing used to include tiny shacks. Air conditioning used to be something not even the rich had.

[sokoloff]

If the prices dropping to the cost of construction plus a 20% profit margin isn’t enough to make housing affordable then those people just literally can’t afford to buy housing.

Build smaller, worse, and cheaper until they can.

[aprilthird2021]

100%, supply leads to price drops. If it's not profitable to build anymore because housing costs have sunk, then there's much less demand for housing that needs to be met.

The biggest political issue is that Americans have been led to believe their homes are assets which appreciate in value. The abundance mindset threatens the net worth of many such people, but they are not the landed gentry of a democratic society. And the people who have nothing and can barely afford rent outnumber them and should vote for their interests.

[andsoitis]

> And the people who have nothing and can barely afford rent outnumber them and should vote for their interests.

my sense is they, too, want to buy free-standing homes with nice amenities that are not really necessary (not rent an apartment or buy a condo) and that appreciates in value.

[maplant]

Right, these effects seem to lag each other. If prices are affordable, there's no reason to build more housing. We've achieved the goal of making affordable housing. Then, more people move in, prices go up, and the cycle repeats.

[kjkjadksj]

The fact that there are still companies building new homes in say Youngstown Ohio shows that prices can fall significantly, by an order of magnitude even, in high cost of living metros before a point is reached where cost of labor and materials makes any build not pencil out.