Land is expensive because the banks will advance huge amounts against your future income. They have no constraint on this as when they advance credit they do so by creating it.
When wages go up, mortgage lending goes up (and by a multiple). The banks hoover up all productivity gains.
NYTimes might want house prices to go down but they have to take on the banks if they mean it.
Incredible that anyone could disagree with this, really, but downvote away.
Really sad you're getting downvoted, as this is one of the smartest answers in the thread that identifies the main reason for rising house prices.
Anyone denying the effect of banks is missing an important point. I suggest looking at positivemoney's articles or videos on youtube for an explanation of this process, it's pretty clear.
It seems difficult to argue with the idea that the reason housing in SF is more expensive that that in Detroit is because there is more money chasing it.
Apparently many think it's because people in SF have forgotten how to build. They are constructing inefficiently using expensive materials.
Credit sets the price. Banks issue as much credit as they can, leaving workers with enough to eat / heat / clothe themselves and no more.
I cannot understand how anyone can think otherwise. This is how we create money.
Where is all the money going in SF with all the highly paid devs? A big wedge to the landlords. Because all productivity gains flow into land because that is what the banks use to create new debt.
> Where is all the money going in SF with all the highly paid devs? A big wedge to the landlords. Because all productivity gains flow into land because that is what the banks use to create new debt.
But you don't have to live in SF. You live there because that's where employers who will pay high wages are. Therefore, you decide to live there instead of working remotely or living somewhere with a lower cost of living.
Landlords are not the problem (although, they are a symptom). Tech employers who demand you live in SF are the problem. And as long as employees continue to flock there despite the real estate cost, employers will continue to push the externality of housing costs onto them.
When non-tech workers complain its too expensive to live in SF, everyone says "market forces". When tech workers complain its too expensive, its a housing crisis.
This is how capitalism is designed to work. Demand is being met by supply, and if supply is insufficient, the price rises until demand has been reduced.
It's part of an artificial scarcity strategy. Once you force supply below demand then you have to bid. That's whne the credit guys come forward to "help".
Who do you think "the landlords" are? Many are the same highly paid devs you're talking about. I have several friends who own rental properties, and many more who own fractionally via exposure to public corporations and REITs.
Certainly not by definition. Consider a hypothetical market with two houses for rent, separately owned, that get rented by the same person. More landlords than renters. Or consider a house for rent owned by an LLC with three partners.
Banks just provide a service. IMO, cultural norms are the problem - people have overbought housing chasing various subsidies. People are behaving as-if they can depend on rising wages when there's only been the one spot of rising wages in the late '90s, since 1980.
I think you're close, but take a look at "Progress and Poverty" by Henry George. The problem is the failure to capture rents through taxation.
It seems that money creation would be tied to new loans no matter what. A first run through the paper seems to explain the '90s S&L crisis more than it does 2008 - the S&Ls were closer to the ILF model than the FMC model.
It needs to be issued against productive endeavour. Banks issue against land ramping up prices and in doing so they effectively grab themselves a piece of our labour by forcing us to pay a greater share of our income to them via usury.
Usury is One of Those Words. I don't know how a debt instrument needs a distinction like that.
Our culture is such that we cannot make basic distinctions between rents in general and productive work. I suspect we'd have to fix that, then let the existing accounting mechanisms sort it out.
When wages go up, mortgage lending goes up (and by a multiple). The banks hoover up all productivity gains.
NYTimes might want house prices to go down but they have to take on the banks if they mean it.
Incredible that anyone could disagree with this, really, but downvote away.