Ive heard repeatedly when trying to learn about our housing situation that we don’t have enough homes. I don’t understand how that’s the case or if it’s even true. Who or what is stopping more homes from being built exactly? If the demand is so high and the supply is so low then the suppliers would obviously ramp up production, right?
In: Economics
When twenty people put bids in on one house then the person who offers the most money will win the house. This drives the price up. If only one person bids on a house they are not competing with anyone, so they can offer around the value of the house or even less.
You cannot build housing if there is no spare land to build it on. In places with high demand the demand is high because the area is already built up. If a developer buys two $1 million houses to demolish and build four units on, and has to pay $1.5 million to build them then at the very least they need to charge $1 million each to make a profit. So yeah, they have increased the housing supply by 2, but prices have only increased because now the half as big houses with less yard are selling for what a single house used to.
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