What determines housing prices? The seller and to a much lesser extent the buyer.
How does the seller set the price? To what they feel is market price.
You can flood the market with new houses all you want but if the construction company isn't selling at a lower price than existing houses in the area, and they won't be, that's not going to push prices down. Because it's not a traditional commodity. Beyond that, it's pretty much an open secret at this point that new construction is a lower quality house at a premium.
Only a minority of people are in such a rush to sell that they are going to sell their house at a loss or even a perceived potential loss vs expected market price. Many people are willing to just sit and wait for the right buyer even if it takes years.
The big difference between houses and a traditional commodity is that holding one even when you want to sell can still be a net positive. You can continue to live there, you can rent it out. It just doesn't have the same motivation to sell as a traditional commodity.
> Many people are willing to just sit and wait for the right buyer even if it takes years.
I think that's only a large minority. IIUC, a majority of sellers are motivated sellers, people that are selling because life circumstances are forcing them to move and sell.
But even if only a small portion of sellers were motivated sellers, "prices are set at the margin". In other words, if most people aren't selling because the price is too low, the people who are selling are the ones that are setting the price.
> Only a minority of people are in such a rush to sell that they are going to sell their house at a loss or even a perceived potential loss vs expected market price. Many people are willing to just sit and wait for the right buyer even if it takes years.
The people wealthy enough to do this are a small enough group that this cannot have such an outsized effect across the whole market. People typically have to sell their home to afford the one they're moving into, so they can't just sit on it until they get the price they want.
How does the seller set the price? To what they feel is market price.
You can flood the market with new houses all you want but if the construction company isn't selling at a lower price than existing houses in the area, and they won't be, that's not going to push prices down. Because it's not a traditional commodity. Beyond that, it's pretty much an open secret at this point that new construction is a lower quality house at a premium.
Only a minority of people are in such a rush to sell that they are going to sell their house at a loss or even a perceived potential loss vs expected market price. Many people are willing to just sit and wait for the right buyer even if it takes years.
The big difference between houses and a traditional commodity is that holding one even when you want to sell can still be a net positive. You can continue to live there, you can rent it out. It just doesn't have the same motivation to sell as a traditional commodity.