So iphones are more expensive because they’re more expensive to make, Apple’s profit margins aren’t huge? I used to have a business making and selling widgets (let’s call it), I could charge 1000 for them when it cost me 500 to make one, when I got the cost down to 120, still charged 1000. If it cost me 1200, I still wouldn’t be able to get more than 1000 because all of my competitors sold at about that price. Oil trades at 50 last year, 125 last month, production cost doesn’t drive that. When oil gets below 40 some methods of extraction simply aren’t profitable any more.
All cost does is set a floor below which you can’t profit.
Yeah it’s worse for them and better for the significantly higher percentage of the population that would rather buy but can’t afford it because they’re trapped as renters. Not only is it better for more people, it’s better for more people long-term. Eventually those people who know they’re relocating in a few years will relocate, some or most will want to settle down, then they too would benefit from this.
All of this is arbitrary, because these policies are LDO not coming anytime soon, because the wealthy aren’t done fucking everyone yet.
This is explained easily by the fact that cost isn’t the only factor in a price, or that price isn’t entirely reflected in cost.
However, saying that cost has nothing to do with price is way too far in any system with some elasticity. While there are some systems with near zero elasticity, zero elasticity is not true generally and I highly doubt it’s true in real estate.
I think a far example of this is the housing development I’m buying in.
Prices have gone up by about 10-15% on base models since I committed in August/September of last year. Now a good part of that is demand in our area, home prices are up everywhere. However, lumber is about 2x higher than when they opened sales, and I’m sure labor is costing more too. That definitely played into the decision. These factors are intertwined and difficult to separate sure, but saying one doesn’t exist is too simplistic.
This “costs increasing will decrease landlord profit margins but not increase rent” is some crazy, crazy talk. You have to acknowledge classical economics before delving into heterodoxy. This is irrational and illogical talk.
I guess I’ll go ahead and say it: when people on here and elsewhere fret irrationally about “investors” being responsible for housing costs going up, I get a whiff of xenophobia. I know people who talk like this, and it drives me nuts.
In my experience, foreign investors are the people—often the only people—who are doing the exact kinds of projects people ITT are saying should happen: small, dense infill projects on marginal pieces of land that lack the scale to be of interest to corporate developers. Try getting a development loan on this kind of project and you’ll notice it doesn’t meet the criteria of mainstream lenders (which is a fast exit and enough value to be worth their time). They want production volume. Residential high rises, 5 over 1’s, and greenfield subdivisions. Strip malls. American money just isn’t as interested in building 2 units here, 6 units there of middle class housing in decent areas. Foreign investors aren’t the ones bidding up 2,500sf houses in prime areas to 10% over asking; those would be disastrously poor ROI, and houses in that class typically don’t make great rental properties anyways. If someone from China buys a 0.2 acre burned out lot in Atlanta, builds a duplex, and sells it or rents it out, explain how that’s fueling the housing crisis?
People have always blamed outside forces and especially foreigners for their problems. Don’t bite on that temptation here unless you’ve really got the data to back it up. When I’ve looked into it myself, I’ve found it is not at all compelling that foreigners are a big cause of the housing crisis.
Here’s an idea for how to meaningfully impact housing prices: fucking desegregate schools. The fact that people who live in houses in rich neighborhoods are magically entitled to better education than people who don’t is fucking insanity and is at the root of a lot of these problems. We wouldn’t have to worry quite so much about houses being in “prime” areas (because let’s be real, that’s a large part of what we mean) if the USA didn’t have horrifically segregated schools.
When people here talk about investors driving up housing costs, they are mostly reacting to stories about “institutional investors”–private equity firms and the like–buying up single-family homes with cash. I didn’t realize that people were complaining about foreign investors other than Russians buying property for money laundering and Chinese buying EB5 visas with real estate investments.
Has anyone here blamed foreigners for this in any post ever?
It’s mostly American institutional investors, and wealthy (mostly white) American individuals doing this from what I’ve seen/read.
I mean, if the target market is people making $60K a year, and they’re clearing like $50K, their monthly budget is a maximum of a little over $4K and has to include food, utilities, gas, a cell phone, internet, car insurance, car payments, etc. Rent can absorb a maximum of 100% of the rest. So if it becomes unprofitable to rent out a home at 100% of the rest for the target market’s salaries, they can’t increase rent anymore and still find tenants.
You guys have been good ITT about not naming foreigners (and I agree—institutional investors are much more of a mixed bag and problem than foreign investors, although there is some overlap).
But it’s out there. I think when a lot of people hear “investors,” they think foreigners. Tons of articles about high house prices will drop the “global investors” line and sometimes even focus on that aspect.
Real estate speculators have capitalized on this reality, worsening the problem. Many of these “investors” aren’t based in the United States. These investors include Chinese housing speculators, who are among the fastest growing owners of California real estate. Unlike working class families, many of these foreign real estate speculators buy in cash.
Foreign investors are buying more property in Florida
The ease with which they can access credit strains the market and drives up prices. Those effects are likely magnified when investors target homes in cities less expensive than the ones in which they live, whether they’re Chinese investors in California or Californian investors in Texas.
I’ve talked to people IRL who have definitely connected these dots.
I’m not saying it’s not true. I’ve only seen it presented as a neutral statement of fact. I’m saying it’s not a racist trope like “They took our jerbs”.
If it is, I’ve been completely blind to it. I suppose that’s possible.
I’ve heard it from a few people I know that are looking to buy homes. Complaining about how all the foreigners (often focusing on Chinese) are driving up the prices of homes and buying homes and not even using them. Not overtly racist, but it’s pretty clear the point they’re trying to make.
I mean, anecdotally, Asians are just way more disciplined about saving money and housing multiple generations under the same roof. I could definitely see entitled Americans being racist asshats on this but I haven’t directly seen or heard that.
Depends on their home city or area of reference. In Vancouver it’s been very much the case for over a decade now. Huge amounts of property owned by foreign nationals (generally Chinese) who don’t appear for years on end.