Genuine question: how reliable is data from 1980-2006 when, by the turn of the decade in 1980, we'd had about a decade of mortgage-backed-securities incentivizing the type and location of what housing was built? I don't disagree that the data seems to pretty clearly show that access to mortgages correlates with falling rents, but access to mortgages during this time period was heavily influenced by which mortgages could be packaged quickly into an MBS, regardless of whether it was a decent investment - either on the development side or the buyer side, since banks were financing both.
Phoenix is a good example. They had a 5.9% foreclosure rate in Maricopa County in 2008 - significantly higher than the national average of 1.8% and the average county rate (0.6%). (Certainly some of that is Phoenix's population, as big cities were hit harder than rural areas for obvious reasons.) Phoenix was the poster child for exurban upper middle class home development that your average Joe didn't really need or want, but that made developers, speculators, and banks a lot of money on the back-end. What effect, if any in your opinion, did this developing bubble potentially have on end price, and would you say it changes your analysis at all?
I reject the premise. Coming to a different conclusion about what happened in Phoenix was one of my motivations for spending the last decade researching the housing market. Here is one of the first pieces I wrote for the Mercatus Center. Toward the end, it goes into population growth and home construction trends in Phoenix during that time.
I appreciate the link. What would you say the reason is that the more mainstream opinion is that there was a housing bubble/overflow rather than the opposite, as you posit? Shouldn't this data be fairly accessible?
Supply obstructions slowly turn demand into a price impulse instead of a quantity impulse over time. But in the short term, what is noticeable is that rising cyclical demand is associated with rising prices. Short term cyclical change is over-observed. So, over time, supply obstructions are experienced as increasingly extreme cycles. But they are really just normal cycles that increasingly create price impulses instead of quantity impulses. The peak of that error was 2008. Over time, as every source of demand is squelched in an effort to stop the cyclical price impulses, the core problem of obstructed supply will be obvious to an increasing number of people.
I have to admit I was initially a little dubious of your claims about the impacts of restricted credit on the supply side, so I did a little historical research. You should seriously check out the 'Stop-Go' policies of the Macmillan government in Britain. They tried to restrict credit for mortgages as a means of achieving broader macro-economic effects. It proved disastrous.
I also think there is a case that if migration isn't managed well and selective, it can lead to a massive tilt towards rentier economics. Importing low income populations is inherently reducing the percentage of the population with feasible access to mortgage borrowing. Here in the UK, as the pace of mass migration has increased, leading to what some have called the Deliveroo economy, has had a profound impact on rents, raising rents by 30% in three years. 60% of legal migration in the past 10 years has been in the low or no skilled category, and only 4% of all migrants in the past 10 years fall into the net contributor category.
52.6% were net recipients. There is no similar precise data for native-born citizens, but on average the top 20% paid £35,399 more in taxes than they received in benefits.
The UK is not America, where H-1B and Americas reputation as a destination of choice for entrepreneurs heavily skews the intake. Plus, there are structural cultural factors. Most women in the UK work, but a significant portion of our migration, legal and illegal, has come from MENAP countries where it tends to be cultural norm for the woman to leave work when she marries and has children, and labour participation for women hovers around the 20-29% range.
Historically, the UK did much better. Until recently we were the European model for integration, because our migration from cultures substantially different to the West was slow, but persistent. Recent mass migration has been entirely different. This economic study from the Netherlands shows that migration waves large enough to allow migrants to concentrate into self-segregating communities prevents the migrants from socially integrating and becoming more prosperous as a result.
Put simply, the evidence shows that once basic needs are met, a core priority for migrants from some cultures is avoiding interacting meaningfully with the native-born, even if it means a lower income, more menial and low status work, and even temporary periods of unemployment.
The data on MENAP countries is pretty consistent regardless of country. It’s why the IMF helped popularise the term. Even Australia, a model for successful immigration and prosperous foreign-born citizenship, has failed with MENAP populations. There are a few exceptions. As stated, our previous period. America has also enjoyed success because in many instances the migrants were highly educated, liberal and fleeing religious or political persecution. America experienced a definite economic net benefit in specifically helping those who were fleeing political and religious persecution. America will likely begin to see more distinct patterns emerge, those from MENAP cultures which are from the older cohort of integrated migration who are more successful, and those who are part of wave migrations, self-segregate into communities and are not.
Put simply, when migrants are forced by circumstances on the ground to integrate then they will be as successful as the native-born population. If they have the ability to form cultural enclaves which then self-segregate from the broader population, then it’s a recipe for an intergenerational lack of social mobility, and is generally attributed to structural racism when the disparities are driven by free choice and self-exclusion through ingroup preference rather than discrimination.
It's semantics but the title of your articles perpetuates the conflation of "supply" and quantity or quantity supplied. This distinction is really quite important. A lot of misconceptions about housing markets are textbook econ 101 examples of confusing shifts along a supply curve and a change in quantity supplied with changes in supply. We need the average person to understand the distinction if we don't want to keep repeating ourselves. Moreover, this distinction is actually what's at the root of your article.
Maybe it's unfortunate that the term is "supply" but that's what economists use today. We can come up with a different less confusing word (suppliability?) but there's no substitute for understanding the difference between what we call supply and what we call quantity.
I appreciate your point, but the word “supply” in the title isn’t strictly referring to the movement of a demand curve along a linear and stationary supply curve so I think it’s fine.
Genuine question: how reliable is data from 1980-2006 when, by the turn of the decade in 1980, we'd had about a decade of mortgage-backed-securities incentivizing the type and location of what housing was built? I don't disagree that the data seems to pretty clearly show that access to mortgages correlates with falling rents, but access to mortgages during this time period was heavily influenced by which mortgages could be packaged quickly into an MBS, regardless of whether it was a decent investment - either on the development side or the buyer side, since banks were financing both.
Phoenix is a good example. They had a 5.9% foreclosure rate in Maricopa County in 2008 - significantly higher than the national average of 1.8% and the average county rate (0.6%). (Certainly some of that is Phoenix's population, as big cities were hit harder than rural areas for obvious reasons.) Phoenix was the poster child for exurban upper middle class home development that your average Joe didn't really need or want, but that made developers, speculators, and banks a lot of money on the back-end. What effect, if any in your opinion, did this developing bubble potentially have on end price, and would you say it changes your analysis at all?
I reject the premise. Coming to a different conclusion about what happened in Phoenix was one of my motivations for spending the last decade researching the housing market. Here is one of the first pieces I wrote for the Mercatus Center. Toward the end, it goes into population growth and home construction trends in Phoenix during that time.
https://www.mercatus.org/research/policy-briefs/housing-was-undersupplied-during-great-housing-bubble
I appreciate the link. What would you say the reason is that the more mainstream opinion is that there was a housing bubble/overflow rather than the opposite, as you posit? Shouldn't this data be fairly accessible?
Supply obstructions slowly turn demand into a price impulse instead of a quantity impulse over time. But in the short term, what is noticeable is that rising cyclical demand is associated with rising prices. Short term cyclical change is over-observed. So, over time, supply obstructions are experienced as increasingly extreme cycles. But they are really just normal cycles that increasingly create price impulses instead of quantity impulses. The peak of that error was 2008. Over time, as every source of demand is squelched in an effort to stop the cyclical price impulses, the core problem of obstructed supply will be obvious to an increasing number of people.
I have to admit I was initially a little dubious of your claims about the impacts of restricted credit on the supply side, so I did a little historical research. You should seriously check out the 'Stop-Go' policies of the Macmillan government in Britain. They tried to restrict credit for mortgages as a means of achieving broader macro-economic effects. It proved disastrous.
I also think there is a case that if migration isn't managed well and selective, it can lead to a massive tilt towards rentier economics. Importing low income populations is inherently reducing the percentage of the population with feasible access to mortgage borrowing. Here in the UK, as the pace of mass migration has increased, leading to what some have called the Deliveroo economy, has had a profound impact on rents, raising rents by 30% in three years. 60% of legal migration in the past 10 years has been in the low or no skilled category, and only 4% of all migrants in the past 10 years fall into the net contributor category.
What percentage of native born are net contributors?
52.6% were net recipients. There is no similar precise data for native-born citizens, but on average the top 20% paid £35,399 more in taxes than they received in benefits.
The UK is not America, where H-1B and Americas reputation as a destination of choice for entrepreneurs heavily skews the intake. Plus, there are structural cultural factors. Most women in the UK work, but a significant portion of our migration, legal and illegal, has come from MENAP countries where it tends to be cultural norm for the woman to leave work when she marries and has children, and labour participation for women hovers around the 20-29% range.
Historically, the UK did much better. Until recently we were the European model for integration, because our migration from cultures substantially different to the West was slow, but persistent. Recent mass migration has been entirely different. This economic study from the Netherlands shows that migration waves large enough to allow migrants to concentrate into self-segregating communities prevents the migrants from socially integrating and becoming more prosperous as a result.
Put simply, the evidence shows that once basic needs are met, a core priority for migrants from some cultures is avoiding interacting meaningfully with the native-born, even if it means a lower income, more menial and low status work, and even temporary periods of unemployment.
The data on MENAP countries is pretty consistent regardless of country. It’s why the IMF helped popularise the term. Even Australia, a model for successful immigration and prosperous foreign-born citizenship, has failed with MENAP populations. There are a few exceptions. As stated, our previous period. America has also enjoyed success because in many instances the migrants were highly educated, liberal and fleeing religious or political persecution. America experienced a definite economic net benefit in specifically helping those who were fleeing political and religious persecution. America will likely begin to see more distinct patterns emerge, those from MENAP cultures which are from the older cohort of integrated migration who are more successful, and those who are part of wave migrations, self-segregate into communities and are not.
Put simply, when migrants are forced by circumstances on the ground to integrate then they will be as successful as the native-born population. If they have the ability to form cultural enclaves which then self-segregate from the broader population, then it’s a recipe for an intergenerational lack of social mobility, and is generally attributed to structural racism when the disparities are driven by free choice and self-exclusion through ingroup preference rather than discrimination.
https://link.springer.com/article/10.1007/s00168-019-00953-8#Tab4
It's semantics but the title of your articles perpetuates the conflation of "supply" and quantity or quantity supplied. This distinction is really quite important. A lot of misconceptions about housing markets are textbook econ 101 examples of confusing shifts along a supply curve and a change in quantity supplied with changes in supply. We need the average person to understand the distinction if we don't want to keep repeating ourselves. Moreover, this distinction is actually what's at the root of your article.
Maybe it's unfortunate that the term is "supply" but that's what economists use today. We can come up with a different less confusing word (suppliability?) but there's no substitute for understanding the difference between what we call supply and what we call quantity.
I appreciate your point, but the word “supply” in the title isn’t strictly referring to the movement of a demand curve along a linear and stationary supply curve so I think it’s fine.