A Bubble? Or Taxes? Or Supply and Demand?

Real estate prices in Southern California (where I reside) continue on an upwards trajectory. The Los Angeles Times (one-time registration required) has an interesting article that speculates on why people are not selling their homes. The article notes property taxes and transaction costs as two of the main reasons why.

However, the article doesn’t address the main “culprit.” (I’m not even sure that culprit is the right word. On paper, this boom has made me a lot of money.) It’s NIMBY.

Basic economics state that if supply is constant but demand increases, price increases. There is almost no land available to build new homes. What land there is has environmental restrictions, traffic restrictions, and other restrictions placed on it, decreasing the number of new homes built and increasing their cost.

One Response to “A Bubble? Or Taxes? Or Supply and Demand?”

  1. Andrew says:

    Do you have any citations for this? Or evidence of any kind?