The only way to reduce housing prices is to build more houses; look at the Hamptons
If you need more convincing of the economic fact that high and rising housing prices are a result of demand outpacing supply, take a look at what is happening in the Hamptons. According to CNBC,
After two years of strong demand and soaring prices, the supply of rentals in the Hamptons is surging, leading to a wave of last-minute price cuts. Median rental prices in the first quarter fell 26%, according to Jonathan Miller, CEO of Miller Samuel. Brokers say some owners are slashing prices by 30% or more just to fill their properties.
“There is a tremendous amount of inventory and people are not renting it,” said Enzo Morabito of Douglas Elliman. “And it’s across all segments, from the very low to the very top of the market.”
The weakness marks a dramatic and rapid reversal for one of the country’s highest-priced and most sought-after real-estate markets. In 2020 and 2021, renters were scrambling to find summer rentals and paying record prices months before the season for fear of missing out. Now, brokers say there are hundreds of rentals still available for the summer.
Morabito said he represented one waterfront rental that was asking $70,000 a month, but a potential renter offered just $45,000.
“We were hoping the renter would split the difference, but it’s a different market right now,” he said.
There is no escape from demand and supply
Rent control advocates would like to believe that high and rising housing prices are a sign of exploitation, and that this exploitation stops when legislators enact rent control.
That is far from the truth, however. Any good or service that is sold in a market is bound to the laws of demand and supply. That includes even housing.
High supply when met with low demand results in low prices as sellers compete for buyers. And vice versa, low supply when met with high demand leads to high prices as buyers compete for goods and services.
Sure, we cannot draw results from just looking at the Hamptons. But this is a phenomenon that numerous cities around the country have experienced, especially during the pandemic. Even in the Twin Cities, rising vacancy rates were followed by declining rents during the pandemic.
Current events in the Hamptons only work to confirm what Twin Cities lawmakers should know by now; that the only way to reduce housing prices is to improve supply.