Flippers also reduce the supply of housing units for the time they are unoccupied, which could be months or years, especially when sold to other flippers. More liquidity is not necessarily a good thing for the housing market, as it tends to increase the number of speculators on the market, contributing to a vicious cycle where more homes are being flipped between speculators than actually occupied by people who need them.
It pains me to watch people apply simplistic theoretical laws of supply and demand to something as complicated as housing. The map is not the territory. There are massive costs to increasing supply, as well as psychological/community costs to moving homes, which are not cleanly captured in any Economics 101 textbook.
Here’s a thought experiment: if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?
I think you’ve bought into the tik tok narrative that somehow it’s zillows fault that houses are expensive.
I'm buying housing for myself. It would be a potential relevant thing to take into account between choices, but I still need a house.
I'm buying a long term asset, so the liquidity of the housing market is not relevant to me, unless I'm actually buying for a specific short term, like a planned work period.
Liquidity of the housing market is only important to the agents and the loan originators because they make money on the flow.
> if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?
No. Like a normal person, I bought my house to live in and to improve and to stay in for a long period of time. It isn't a speculative investment vehicle.
It seems like you’re presenting a straw man. Being able to sell your house and not be tied to one home for life is a reasonable desire that has nothing to do with speculative investment.
No, it's that if I need to sell it I've structured my finances and my life to be able to take time to do it--because I've intentionally made decisions with the remodeling in my home to be suboptimal for selling anyway. I'd have to put up a wall and reroute a bunch of plumbing for my laundry room off my master bedroom so I could turn it back into a bedroom because that's what the dollar-signs-for-eyes crew values, so why would I be worried about selling it in 48 hours?
This is an industry I actually know a teensy bit about. Normal people don't need to sell a house in two weeks. That is an abnormal condition brought on by stupid, disinterested money flooding the market and the idea that everyone must be hyper-mobile all the time is one brought on by the more deranged, "humans exclusively acting as work producing automatons" part of a market economy. Solidity and permanence are valuable. I'd go so far as to say that when you take into account the benefits of long-term residence and ownership--and they are benefits you will not see in your ML model, such as a cohesive neighborhood where you actually know and maybe even interact with the people who live around you--that it might even be a positive to discourage market thrash. You know. For humans, and not investors.
> structured my finances and my life to be able to take time to do it
so you do agree that it takes time to buy and sell real estate. The reason liquidity is better for market efficiency is that liquidity allows the price of the asset to move towards the "true" price, where either party of the transaction doesn't feel they've been cheated.
If you claim that house flippers are "cheating" the long term buyers, then you must also agree that the market is currently inefficient, and that the long term buyers is paying above the "true" price. Liquidity would actually alleviate that problem!
if you don't agree that flippers are cheating their price higher, then you must also agree that the long term buyers are getting a better deal.
So either way, liquidity makes the market more efficient, and results in the "true" price of the asset to be revealed sooner and easier.
It’s clear your approach to housing is consistent with your life choices. I think maybe you are just thinking your approach is “normal” and the right way to do things.
A lot of people buy starter homes, or homes in areas they do not plan to stay 10+ years, or homes they outgrow. That’s all normal too.
> if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?
It would not change my physiological need for shelter, no
“Oh I might not be able to sell this for a profit in two years, guess I’ll die in the street”
Arguably, it's good for both. Buyers have more quality inventory to choose from and can purchase a home with lower risk of getting trapped in it permanently. Sellers get faster sales with a higher floor on prices.
Liquidity is NOT good in a dire-necessity supply-constrained market like housing, because it invites capital which could've been spent elsewhere to lock up unnecessary housing units (houses are empty while being flipped), further constraining supply of a critical resource.
Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks and sold back-and-forth on paper between capital-rich investors instead of actually being pumped to where it was needed through pipes.
> Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks
then you'd see people not waste any water at all, and fix any pipe leakage, and conserve water, and use water efficient agriculture methods etc.
The price of a commodity determines how much and how easily it is available. The fact that water is so liquid (both in terms of the price, as well as being an actual liquid) is because of the high amount of investments made into obtaining it over the past centuries. Liquidity of any asset (or commodity) is a good feature to have imho.
Both. In an illiquid market, it takes a long time to find buyers or sellers. You are incentivized to overprice (if selling) or underprice (if buying) and wait a long time to see if someone will match you. A liquid housing market means people can buy or sell the house at the "right" price without waiting many months or years.
As a seller, would you rather wait a year to make a bit more money? That wouldn't be good. That would be crappy.
Sure, but the more important point is that the market represents housing. Having housing empty is pointless, so market speculation is that is not about the rent from the asset but only its capital growth leads to that exact outcome, empty housing has lower expenses and depreciation in reality, which helps maintain the asset's value better than if someone was living in it.
I haven't heard of housing sitting empty. Even if there is a flipper in the chain of possession, houses end up getting acquired by long-term investors who rent them out or people who actually live in them. As far as I'm aware.
Flippers take the risk of the market falling while they're flipping - that's the price they pay for their profits.