Quote:
Originally Posted by The ATX
Increasing the supply is what lower prices. That's it. So many people think that we should stop letting developers build homes/condos/Apts. just because of the high prices/rents they are getting for them. I just keep SMH at how people don't see that stopping/eliminating development is what's keeping prices higher on existing places.
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Price is determined by what people are willing to pay. Abundant supply certainly gives buyers a better chance of negotiating a lower price, but it doesn't drive price to the extent you're implying. We could just as easily make Austin affordable by driving away employers and plunging the region into a recession, or we could see prices drop if (and when) we experience a severe multi-year drought that scares people away. Prices drop when costs drop, too. All of the specific requirements tacked on by local gov't add to the cost of living here. Then there's the cost of materials, labor, engineering for the site, on and on it goes. We're going to be an expensive city until some sort of disaster strikes, and I'm pretty sure we can't build our way out of that. We could have a boom in new housing construction and that would just help fuel more growth, while putting only a small dent in the supply-demand equation.
There's a shortage of people in just about all phases of construction anyway, so of course that means that those workers demand higher wages and salaries --- it's a big circle-jerk of inflation. In fact, i wonder if there isn't a "flow" aspect to housing prices, similar to traffic, whereby you don't see improvement until you fix the bottlenecks. Like, is there a component of housing prices that acts as a floor? I think social psychology is a big part of it. Buyers reinforce one another's perceptions, and people pay what they believe is a reasonable price based on their perceptions of Austin's real estate market and other intangibles. It's mob psychology. Buyers could go on strike and make Austin affordable in a matter of weeks. We co-create reality.