I'm not sure what you are talking about. Price of a house is not some thing banks get to decide, at least not directly. They only get they to decide the amount of interest they should collect to stay profitable after lending you money that you borrow to purchase a house.
Price of a house apart from the raw materials depends on various thing like supply-demand factors. But that is the case with any investment.
If you are having problems with investments in general where people can get rich by starting small but growing non-linear with time, then you are literally ruled out to ever be rich.
Reducing the "housing crisis" to supply and demand ignores the driving factor in price rise: the finance that allows people to buy 10x their annual gross, and more.
If banks only leant 2x or 4x (like they used to) house prices would quickly depress.
Except that would route the wealth from the middle class upwards, so it's unlikely to ever be allowed to happen.
I used to say "a house will always have the price of a house" (it has issues of course cough 2008 cough) to illustrate what you're saying here as I never managed to explain it properly like you did.
Banks push this to the limit by making it comparatively expensive for individual buyers to build, preferring to offer loans for already overpriced homes.
Edit: At least this has been my experience. Have people found otherwise themselves?
Cost to borrow money (for an institutional investor) and buy a house with that money generates a return. Meaning they can buy these homes up all day long and make a profit.
I think the discussion so far, while interesting, is tangential to the point the article is trying to make. The point is that supply of housing isn’t the only thing affecting house prices. If you view houses as financial assets with varying value, it’s the supply of financial assets that matters, not just the supply of houses. Or am I missing the point?
Basic economic theory says that the price is determined by supply and demand. Investors buying house does not affect supply or demand, since they will simply rent out the house.
If you claim that investors are causing a significant price increase then I think onus would be on you to cite a source.
People can only ask for as much money for houses as people are prepared to pay. It isn't true that speculators can simply drive the price up as high as they want.
If investing in housing is a good way to make money, it is an incentive to build more housing.
Even foreign money could be good. If foreigners pour lots of money into your housing market, you could build lots of cheap houses and sell it to them for lots of money, for example. (not saying you should, just saying foreign investment in housing is not automatically a net loss).
Homes are people more important asset and the way the market is (unique items that people choose carefully and bid on) it's quite normal that over time prices would rise in line with wages.
Historically, wages are increasing faster than inflation (people are getting richer), which means house prices have a 'natural' potential to rise faster than inflation, and thus be viable investments.
If prices rise faster than wages across the board there will be a correction at some point: quite simply prices cannot go higher than what people can pay.
As long as housing remains an investment asset the price will continue to go up.
If we would just decide that housing is meant to be lived in, not profited from, you'd see the price come down overnight because investment companies and rich people wouldn't be buying up hundreds of houses they'll never live in.
There are two parts to buy house. One is hedge for rising rents. You pay the same mortgage and then don’t pay anything. Decades ago and still in unpopular areas, house prices rose with inflation and weren’t really investment.
Two is investment. Land prices in popular areas started rising because of demand. Housing turned into way to make money and build wealth. But it is really land speculation.
And in many cases it's private investors buying houses for speculation (either by increasing rent or by using them for AirBnBs) the ones that drive prices up, not an increase of supply.
In any case, my point is that applying market rules to housing does not make sense, it's not a competitive market at all and never can be.
Price (in essentially all cases, particularly for commodity goods like housing) is based on supply and demand, not on the individual financial situation of the person selling the product.
If demand for housing climbs noticeably, rates will follow, and vice versa (if supply of housing climbs, rates will plummet)
The reason profit exists is that risk must be assumed to earn it.
Correct. You will get less house for your money than you would if houses were not in high demand. Same as the price of everything else works. And if other people want to spend more than you on houses why shouldn't they?
Except no one decided that - it falls naturally out of the facts that homes are expensive (and therefore represent a large chunk of the wealth of most people) and that homes do not depreciate very much as a result of people living in them.
The point I'm making is that the supply that most affects house prices is not the supply of houses, so to say it's "supply and demand" and stop there is to imply heavily that the supply in question is the supply of houses. Which is wrong.
commodity
Houses AREN'T commodities. Commodities are, by definition, fungible. Houses are not fungible. If you are thinking of houses as a commodity, and trying to apply the rules of commodity economics, that is a large part of your misunderstanding.
There is nothing special about houses other than the fact that you can live in them.
That's also not true. Something funny happens inside people's heads with houses. They will go to stupid lengths and put themselves into ridiculous situations in order to get one. People who would drop any other investment with the same characteristics like a hot potato somehow can't see it when it's a house. They're not like "any commodity or potential investment vehicle" (not least because they are NOT a commodity, as explained above), and to say that they are is wrong.
As it is, I'm presenting a lot of argument and you're going "nu uh, nu uh, you're wrong". Do you have anything other than just saying "nu uh", or is that the limit of your argument? If this is a fundamental axiom for you that simply cannot be argued, just say so.
Price of a house apart from the raw materials depends on various thing like supply-demand factors. But that is the case with any investment.
If you are having problems with investments in general where people can get rich by starting small but growing non-linear with time, then you are literally ruled out to ever be rich.
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