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0 pointsmistermann7y ago0 comments

> Housing markets are only(!) overheated if supply is not keeping up.

Would this imply that there was a tulip shortage in Holland in the 1630's, or am I being excessively pedantic and should have assumed a prefix of "In the long run...."?

https://en.wikipedia.org/wiki/Tulip_mania

Or another way of putting it is: is there evidence that all markets are perfectly balanced at all times, always and everywhere? Is the market perfectly rational, or do various ratios sometimes vary for no mathematically obvious reason?

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bobthepanda7y ago

If supply were able to keep up with demand, then the tulip price could've stayed the same. Of course, we live in the real world, where you can only ramp up production of good so quickly. But no one said the demand is rational.

There are places which manage to build housing without massive price appreciation, like Tokyo. But once the market's too overheated because of supply mismatch you basically can't cool it down only using construction, because construction time takes so long.

mistermannOP7y ago

> But no one said the demand is rational.

If the demand isn't rational (for example, actual need for physical shelter), it doesn't require a lack of supply for a market to become overheated.

Markets can be very strongly affected by greed and mass delusion, an actual lack of supply is not required to drive prices up significantly. You could have a fun pedantic argument over that last statement if you don't want to differentiate on the different kinds of demand, but my point is that demand can vary dramatically with little change in underlying fundamentals - human emotion is more than enough.

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