[seanmcdirmid]

I never argued that new supply is bad. My only observation is that new supply does not always lead to price decreases since demand isn't fixed (e.g. Seattle isn't a closed system). I think another comment that mentioned equilibrium is probably a better way of putting it. It can take a lot of supply before the price point changes as new supply is added because a lot of people are waiting on the sideline to pay X that is already being paid for existing supply (but they are unable to pay X+1 to force someone out and take their place).

[mediaman]

New supply obviously increases demand because shifting the supply curve to the right (more quantity) reduces the clearing price, which increases demand. That's econ 101. In this classic case, increasing supply both decreases price and increases demand.

But what you're arguing is different: that increasing supply has no effect at all on the clearing price. That would require an unusual demand "curve" that is perfectly flat, i.e., perfectly elastic, where there is infinite demand at a given price and zero demand at just a dollar above that price (or else that infinite demand would have already pushed prices up higher than the pre-existing price).

This clearly doesn't make any sense for the housing market; home buyers are sensitive to price, there is not infinite demand, some people have more or less desire to pay for a house. In fact, perfectly elastic markets essentially don't exist, and very low slope demand curves only exist in some unusual edge cases in markets (such as commodities that are near-perfect substitutes).

[seanmcdirmid]

> that increasing supply has no effect at all on the clearing price.

I never argued that it has no effect, only. that it could have no effect. Obviously if you can build enough supply and get way ahead of demand, you will see prices fall. But that just isn't done in practice, so most of the time new supply is brought online, housing prices do not decrease. Well, that's just builders trying not to kill themselves in a market economy, so that shouldn't be surprising.

[roenxi]

The argument is clear, but where you are coming from or going to with this isn't. You're describing a situation where Seattle desperately needs large amount of construction of new housing. If we're hypothesising this mob of people who will move to Seattle as soon as they see a house for $700,000, house prices in Seattle are going to have a floor of around $700,000. Someone is going to need to build houses for those people if anyone wants to pay less than that.

Thanks to the magic of Simpson's Paradox it is possible to have the average house price go up even if houses get more affordable for literally everyone, which seems to be the situation you're going to. Which is true and interesting, but not really politically important. Obscure mathematical effects do draw attention to the fact that one metric isn't enough to develop policy, but shouldn't eclipse the fact that more houses is what people want, need and should be getting. There is this crowd of people who want to move to Seattle and live in nice houses, let them do that and pay people in Seattle to build them. Otherwise everyone will have to compete for existing housing stock.

[seanmcdirmid]

Builders aren't making much money due to material and labor costs in addition to land costs. It is probably impossible do a non-ADU project for just $700k, so dumping money into the problem isn't going to help make things cheaper. This is before we get to regulation and zoning, which are not even close to being the bottlenecks right now. I wonder if we could invest more in making building cheaper (via prefab?), and then more building would happen and prices would actually fall.

We (Seattle) are also completely built, new projects must overwrite existing housing stock and additional capacity only comes from increased density.