I think panhandling is a rational occupation for certain kinds of people. From what I understand, a panhandler can make as much money as a low-skilled minimum-wage employee. The working conditions are much better. You name your own hours, work when you want, no nasty bosses, and you can even drink on the job.
Yes, and I think you can argue this is also part of the competitive process. The net supply of panhandlers will rise as long as the return is greater than the opportunity cost. I say net supply because some suppliers might leave the market as others with a lower opportunity cost enter the market. We would expect that the people left will be those with the characteristics and preferences you describe.
Brilliant. I was an NYU student in the late 1980s. The walls of Penn Station were covered by panhandlers (I would imagine the same was true for Grand Central Terminal). Panhandlers were also camped strategically along the way between where our dorm apartments were located and the main buildings where most of the classrooms were found (near Washington Square Park, where camps of panhandlers could also be found).
My roommates and I all had our favorite panhandlers (mine were young kids) to whom we almost always gave our spare change. Whenever another panhandler gripped about not getting anything from us, we would simply tell him we already gave something. That actually seemed to satisfy the other panhandlers.
Hello! I have enjoyed many of your previous posts on economics and price theory. One factor affecting the price of an asset or product is the liquidity with which it trades. This determines price discovery, which can take a very long time with some assets.
No asset is less liquid than real estate. A year ago I wrote a Substack post about residential real estate. I argued that our much ballyhooed housing shortage was an illusion; in fact we were on the verge of a significant glut. Since then, things have rolled out pretty much as predicted.
I wonder if you agree with me about how today's real estate market is being priced.
1. COVID hit at a time when mortgage rates were ~3%. Covid relief drove a tsunami of cash into consumer and corporate accounts. This gave potential buyers the down payments to buy homes, which drove prices higher by 30 -50%. (A huge share of this demand came from institutional investors, whose funds were getting huge inflows.) This demand also sparked a surge in new home construction.
2. These higher prices were more or less justifiable with 3% mortgage rates, but when the Fed started QT and mortgages went to 6-7% these same homes became way overpriced. But the prices didn't adjust.
3. The market froze up and remains frozen because people are locked into their 3-4% mortgages and no one will sell at less than the most recent comparable. (See Dan Kahneman's "anchoring" and "availability" heuristics.) But eventually they will have to sell as taxes and insurance costs rise and people change jobs and move to retirement homes. I think that conventional measures of inventory are meaningless. I think that there are millions of people who are willing, indeed eager to sell at their perceived asking price, but no one will cut price and no one can afford to buy them at the higher price. That will soon change.
When I wrote this, I thought that home prices would decline 15-30%, but now I think that things look much worse. Mainly, as you point out, due to demographic trends, especially our insane immigration policy.
This is contrary to the conventional wisdom which holds that we have a housing shortage, full stop. But in my opinion "affordability" is more a function of price than supply (I'm not sure that makes sense, but you know what I mean.)
I think panhandling is a rational occupation for certain kinds of people. From what I understand, a panhandler can make as much money as a low-skilled minimum-wage employee. The working conditions are much better. You name your own hours, work when you want, no nasty bosses, and you can even drink on the job.
Yes, and I think you can argue this is also part of the competitive process. The net supply of panhandlers will rise as long as the return is greater than the opportunity cost. I say net supply because some suppliers might leave the market as others with a lower opportunity cost enter the market. We would expect that the people left will be those with the characteristics and preferences you describe.
Brilliant. I was an NYU student in the late 1980s. The walls of Penn Station were covered by panhandlers (I would imagine the same was true for Grand Central Terminal). Panhandlers were also camped strategically along the way between where our dorm apartments were located and the main buildings where most of the classrooms were found (near Washington Square Park, where camps of panhandlers could also be found).
My roommates and I all had our favorite panhandlers (mine were young kids) to whom we almost always gave our spare change. Whenever another panhandler gripped about not getting anything from us, we would simply tell him we already gave something. That actually seemed to satisfy the other panhandlers.
Hello! I have enjoyed many of your previous posts on economics and price theory. One factor affecting the price of an asset or product is the liquidity with which it trades. This determines price discovery, which can take a very long time with some assets.
No asset is less liquid than real estate. A year ago I wrote a Substack post about residential real estate. I argued that our much ballyhooed housing shortage was an illusion; in fact we were on the verge of a significant glut. Since then, things have rolled out pretty much as predicted.
I wonder if you agree with me about how today's real estate market is being priced.
https://charles72f.substack.com/p/housing-goodbye-drought-hello-glut
In a nutshell, here is what I believe happened:
1. COVID hit at a time when mortgage rates were ~3%. Covid relief drove a tsunami of cash into consumer and corporate accounts. This gave potential buyers the down payments to buy homes, which drove prices higher by 30 -50%. (A huge share of this demand came from institutional investors, whose funds were getting huge inflows.) This demand also sparked a surge in new home construction.
2. These higher prices were more or less justifiable with 3% mortgage rates, but when the Fed started QT and mortgages went to 6-7% these same homes became way overpriced. But the prices didn't adjust.
3. The market froze up and remains frozen because people are locked into their 3-4% mortgages and no one will sell at less than the most recent comparable. (See Dan Kahneman's "anchoring" and "availability" heuristics.) But eventually they will have to sell as taxes and insurance costs rise and people change jobs and move to retirement homes. I think that conventional measures of inventory are meaningless. I think that there are millions of people who are willing, indeed eager to sell at their perceived asking price, but no one will cut price and no one can afford to buy them at the higher price. That will soon change.
When I wrote this, I thought that home prices would decline 15-30%, but now I think that things look much worse. Mainly, as you point out, due to demographic trends, especially our insane immigration policy.
This is contrary to the conventional wisdom which holds that we have a housing shortage, full stop. But in my opinion "affordability" is more a function of price than supply (I'm not sure that makes sense, but you know what I mean.)