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Comment by antisthenes | Hacker News Reader

Yes, it will have a huge effect on real estate, but probably not the way you think it will. Real estate prices in desirable urban areas will continue to grow at the same, or higher pace. If you look at urban zip codes in desirable economic areas, they were barely affected by the 2008 downturn, and by 2010 the prices were recovered.

Today, those prices are much higher than they were in 2007.

Land supply is an almost straight line with a slight growth, probably something on the order of y = 1.2x, mostly due to innovations in transport speed, cars & metro. So unless we get maglev metro that travels at 200mph, RE prices will continue to reach new highs.

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My bet is driverless cars, whenever they arrive, will actually increase the value of rural/small town land that's ~1 hour from a city center.

Hypothesis is many people live close to the cities because they hate commuting. But if commuting means work on a laptop or watch a movie, then the commute time is less significant. It's the near ring suburbs that will take the biggest hit. Small towns outside the suburbs will increase.

I suspect that commuting traffic will increase to eliminate this advantage. Already in major metros, long commutes suffer low speeds due to congestion during rush hour periods. Without a commensurately vast increase in infrastructure investment, I do not foresee a significant change in commute experiences from self-driving cars.

I predict that most people would not elect to live 2 hours away from offices despite being able to have access to entertainment and work while commuting.

The evidence is already here: various tech companies run shuttles to far-flung areas (Google has shuttle service from Stockton to Mountain View), yet employees aren’t moving to these lower-cost areas in large numbers.

Workers with families will have upper bounds to how long a commute they’ll endure. Their families are more important to them than being able to have entertainment, and meeting times limit the amount of time that can be used for work done while commuting. At that point, it’s approaching remote work, which is a promising idea, but isn’t a solution for long commutes by itself.

I see self-driving cars changing last-mile and replacing hub-and-spoke commutes as a replacement to taxi services and short-distance shuttles.

It'll work both ways, though. With ubiquitous driverless cars, offices may see less value in being in expensive urban centers and spread out.

Taken to its logical extreme: If people could teleport from one place to another instantly, there'd be almost no value at all to congested urban spaces. Similarly, if anyone can hail an affordable driverless Uber in seconds and reach their destination faster (due to improved routing / traffic flow and smaller cars) without having to think about parking, a bus schedule, or similar, the value in being physically close to other places decreases.

In that scenario, having your office out in the suburbs at a much lower cost becomes more reasonable. Transportation becoming more frictionless inherently makes longer distances more conceivable for travel (including commutes and office placement).

> Taken to its logical extreme: If people could teleport from one place to another instantly, there'd be almost no value at all to congested urban spaces.

So, like if we start being able to do our jobs in VR?

> I suspect that commuting traffic will increase to eliminate this advantage.

I think maybe in the short term, but in the long term I can imagine self driving traffic moving much faster than regular traffic. Cars all accelerating at the same time at lights, Uber pool in vans becoming super cheap. Roads could dynamically add and remove lanes in a direction without needing infrastructure, since all the cars will just "know" which lanes are available. Personal cars (hopefully rarer) can drive themselves home rather than take up parking space in cities.

The main advantage is the self-driving car could be an extension to your office. For instance if I have an 8 hour day with 4 hours of face-to-face meetings, then it doesn't particularly matter if the other 4 hours are spent commuting because I can work the whole time.

I don't think self-driving cars change the dynamics of traffic. Anything that makes driving faster attracts traffic until the advantage is lost. Often, it actually turns out to be worse due to second-order effects.

3D routes scale much better than 2d roads; also airplane autopilots are much easier to imolement.

I think self-flying electric vehicles will do what self-driving cars cannot.

I'm not so sure.

I've been taking an express bus into the city center from a rural location for a few years now. The time on the bus is between 35-50 minutes each way. Initially, I figured the same thing: I could get an extra hour of work done, work on side projects, etc.

The reality is that although the buses have WiFi, there are not many people working on them beyond the occasional email check. One major issue I found is that it's a lot harder to use a keyboard on something that's travelling on a road surface vs. a railroad. I even joked with someone about this last month as he was sitting next to me trying to write Javascript.

Most people on the bus are either playing video games or listening to music and I suspect that being that the people in this area are older and have families to get home to, having a more pleasant commute isn't remotely as important as having a shorter one would be.

that's a little American (and/or suburban) centric.

I and everyone around me live in urban centers because of the community and environment around your residence.

kids can just go out the font door and play. you get inspired by life and commerce by just looking out the window. etc

assuming you will drive and real state prices only impact how long is very californian.

A lot of people quite obviously love the suburbs. But the people who like cities want to live in the center. This means that as long as there exist some number of people who desire urban living, the prices there should continue to rise. What's being valued is the proximity to other people. And that supply is necessarily constrained.

Certainly some people live in city centers out of necessity. But the super-wealthy could live anywhere they want. They choose Nob Hill and SoHo (and so on). And they will continue to do so. Transportation options have very little to do with it.

Better transportation options for everyone else will be great! But the U.S. is an enormous place, so it's really only the city centers that should continue to see price pressures (because there's plenty of room everywhere else and better transportation options improve that situation).

Yes, some people prefer cities, but we have to ask whether those are the people fueling urban growth.

In San Francisco, I suspect it’s mostly jobs, not love for the city, that is causing growth and fueling housing price increases.

I live close to work because I like sleeping late and this allows me to sleep as late as possible while also getting in at a reasonable hour. A driverless car isn’t going I solve that.

The 15 minute walk/subway combo I have does solve that

Not only driverless but electric cars as well. House prices near the highways will increase significantly because the air pollution will become non-issue

Noise isn't a non-issue though.

Electric vehicles are much quieter though.

Having lived near highways and busy main roads, tire noise, horns and sirens are a lot of the mix.

Most have sound proof walls

If this was the case, could one observe such a trend already in places with proper public transport (light rail etc)?

Yes, there are still many areas with a lot of potential to get worse.

but there are certain areas that can't go much higher and sooner or later each area will reach a price point where prices can't go any higher. Ultimately, it just depends on how much people can afford to pay: which comes down to salaries, commute distance and # of wage earning people per roof. Sooner or later all the coping mechanisms will be exhausted.

The bottom line is, RE prices can't outpace salaries forever. If you double the number of wage earners per roof, you can double the RE price. But, after that it becomes harder and harder, as people aren't willing to live with multiple families per house.

Don't discount the impact of investors who have no intention of living in their owned real estate, though. For these individuals, there is no salary or commute distance factor to consider, so price sensitivity is very different. Thanks to globalization this is an increasingly large factor in rising real estate prices. See cities like Vancouver as an example.

Except, in order to profit, the investors have to eventually sell or rent the homes to actual residents, who would have to worry about salaries and commutes. Otherwise it's just a speculative bubble.

Do they? Lots of homes in places like BelAir sit empty, visited once or twice a year. Either as status symbols or a place to hide I'll gotten gains.

BelAir is also a desirable place to live--at least if you're rich--which means eventually the homes can be profitably sold to an actual resident. (And part-time residents are still residents.)

just wanted to add - the cost of debt and the desire to take on debt, and the laws around mortgage debt, also play a large role.

The recent decrease in the mortgage deduction will likely have some effect.

Unless it becomes more appropriate for more people to work remotely, which is the case. I imagine is one of the main reasons people move to urban cities is because of employment.

Employment, entertainment, education and culture.

And, quality services such as healthcare. Plenty of countryside with no good doctors or hospitals within an hour drive.

The suburbs have those as good or better than in the city though.

You're quite right about desirable urban areas. Example:

The first apartment I rented in midtown Manhattan was a 1BR condo in a fairly new building. The owner had bought it in 2006 for about $775k. In 2010, I looked it up on Zillow to see if I could afford to buy the place (I could not), and it was around $850k. Within a couple years of the crash, it had not only recovered, but appreciated a fair bit.

He sold it in 2014 for $1.2M, and according to Zillow it's now worth nearly $1.5M.

So, about doubled. Worth nothing that S&P500 also about doubled in that period (and quadrupled since the 2009 bottom), while paying dividends.

It's unlikely he purchased that property with cash though. And while you can use margin debt to achieve similar returns, you can't generally get margin called on a mortgage -- which I guess is the one main advantage.

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