You could do some market analysis to figure out who is contributing most to the upwards price spiral and burn their house down. Maybe you do this yearly--you'd have to be restrained enough to not meaningfully impact supply. This would disincentivize being at the top of lists like that. Aggressive investors would find a different sector to play in, which I expect would bring prices down.
Yes but there are 2 main types of demand in there. Demand coming from institutional and extremely wealthy investors and demand from regular folks. Who do you think is more likely to be the responsible for such an increase in price?
So i disagree with the solution you propose. The better solution is to reduce the type of demand that is responsible for this failure in housing prices.
Interesting idea! Who would take the other (long) side of the trade? Why would someone who thinks housing prices are going up not just buy a house outright?
Your acting on independent research doesn't distort the market. If you directly or indirectly control pricing in 30% of housing stock you can drive prices up incrementally because you have influence on every lease offer in that population.
Weirdly, I own a house and think I'd be better off if prices fell-- fell a lot. I bought a few years ago and would be happy if prices uniformly dropped to those levels.
Why? I want a 50% bigger/nicer house in the same area. But bigger/nicer houses have increased in price proportionally to mine. So the gap in absolute dollars between what I have and what I want has expanded quite a bit. My income has increased, but not really enough to cover the gap.
Strong increasing prices really only help homeowners to the effect that they're eventually willing to downsize or move to a lower-cost area.
If prices rise strongly and proportionately I suspect it just causes stagnation. I can't really upgrade without a windfall, thus my house stays off the market. So other folks can't upgrade to my house.
I’m not sure how this would work practically in the US. A huge constituency of people has most of their finances centered around their home as minimally a value store and maximally a growth investment. Having homes go down in price or even just leveling off would create a whole other host of challenges for a society that’s been organized so completely for so long around home values going up.
I modded it up. I'm a geek. We poke fun at ourselves to keep our egos in line.
No, really, you can grab almost any answer you want from data if you tweak the algorithm. Throw in some misplaced incentives for the geeks and the traders and voila! you have a flawed model telling you housing can only go up up UP!. Snake oil comes in many forms.
Yes but I imagine the argument would be that it leads to a reduction in supply & increased demand meaning fewer houses available to compete over which results in a higher over all price which can be applied to all houses, inflating the price beyond a houses intrinsic value.
I'm not sure what sort of call you think I'm making here, it's just an observation of the economic effects. If you've bought a house to live in and the market doubles then halves again, you didn't benefit from the rise nor suffer from the fall. The main losers for a drop in prices are speculators, the main winners are practically everybody.
However home owners that are not actually benefiting from higher prices are incredibly attached to their paper gains and so any policy that threatens that will be wildly unpopular.
If only more people understood that. Almost all homeowners think that rising prices is a good thing for them. Try convincing your average homeowner that the whole market going up by 10% makes no difference to them unless they plan on being homeless.
There's something about money that brings out the worst in people, whether that be malice or simply stupidity.
The problem is that though a lot of homeowners would themselves benefit from dropping prices (most would love to trade up, and as long as we don't end in negative equity, dropping prices would help with that), most people don't seem to understand, and see the house as an investment of the "I can afford a more expensive house" kind (ignoring that those more expensive houses are also more expensive because of the price growth).
Overcoming the psychology of that is politically hard.
Induced demand and housing isn’t talked about enough when discussing housing prices. I’m not going to crunch the numbers, but I could see it working out for speculators with nearly infinite funds to buy up whatever new housing supply as a means to artificially keep supply low to keep their stock of real estate overvalued.
What they think is happening: investors are buying lots of houses, which is driving up prices, so getting them out of that business would lower prices.
What's really happening: supply shortages are driving up prices, which is making housing more attractive to investors.
One last last possibility: the entities consuming supply and supporting the high prices are not typical households.
If you need examples, think of corporate and private rental portfolios, speculators and flippers, vacation rental owners, private nth-home owners, etc
It’s one signal that suggests home inventory might be accumulating in the hands of an investor class that skimming some kind of profit at the expense of families who might otherwise be able fully secure housing for themselves as independent owners.
Fun idea if you have a lot of money - buy 20 houses in a relatively small area. Sell 3 to your Uncle Larry for 40% more than you bought them for, then sell the next 17, ratcheting each up about 5% for every 4-5 houses sold. Boom, you've now created a housing bubble and get to walk away with all the profits. If you do this over 2-3 years you might be able to get a 40% annual return, unless of course the market crashes before you can get out.
I would not be surprised if this was what was happening just on a spread out and wide scale. All home sellers want the price to go up, so if the only way to make them go up is to sell at a higher price, you can prime the pump.
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