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Comment by kbenson | Hacker News Reader

> You're fighting scarcity.

No, they're fighting market inefficiency. A free market requires accurate and timely information to be efficient. This is literally people putting constraints on the market for what they are selling so the information is not available to one side, and the price is inflated.

A rational actor should walk away from a system like this, but if that's all that's available around you because of scarcity, you're forced to work at a disadvantage.

Banning this is akin to banning other anticomptitive behavior, such as collusion and monopolies. That is, it's up to the government to decide whether the harm outweighs the problems regulation introduces (regulation always introduces some level of friction and problems, you just hope to minimize them and maximize the benefits it brings) and is thus worth pursuing.

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These kind of little tweaks to symptoms of the housing shortage are ultimately useless band aids. After a decade of stopping foreigners and corporations from buying houses, slapping the wrists of landlords who have vacant units, and mandating that the bidding process is emotionally nurturing, house prices will still be higher if there is more demand than supply.

In a world where there was enough housing supply, you would just walk away from a blind bidding auction since it's a pain, and buy a bigger house for cheaper across the street.

This, 100%. The rules can be whatever they are, but the participant with the most market power will always end up having the upper hand somehow

Sure! But still or even more then, wouldn't hurt to remove this intransparency aspect and what feels very unfair? Or what's the downside?

You're just arguing with sellers that's why. There's no downside for buyers.

There are costs to creating and enforcing regulation, and then more costs if it needs to be rolled back (say, if there are unforeseen downsides to it).

I don't disagree that they don't fix the problem entirely, nor that they don't address the core problem of housing affordability. I don't think they're useless though. They affect what many people see as an unfair practice. If stopping it is as easy as regulating it away, why not do so? Nobody is going to then turn around and assume the housing affordability problem is fixed, and if they did nobody is going to believe them. It's not like this is some new and not understood problem, nobody believes blind bidding is causing all the problems.

All the market efficiency in the world won't stop the continual increase in prices from bad zoning and missing middle housing.

You pick your battles, as perfect is the enemy of good. That other problems exist is not a valid reason to prevent fixing something if that fix actually helps in some way.

That other problems exist is not a valid reason to prevent fixing something if that fix actually helps in some way

That scarcity exists is the whole reason we're focusing on foreign buyers in 2022. And blind-bidding in 2021. And investors in 2019. And money-laundering in 2018. And Chinese money in 2017. All of these things should be addressed, but every one of them has provided political cover for the real reason that housing is so expensive in popular cities, which is scarcity.

None of these things will matter one whit to housing affordability. "Helps in some way" is fine as long as we understand that it has nothing to do with high housing prices. "Helps in some way" is fine as long as we measure our claims and admit that this is about basic fairness and respect for the law. "Helps in some way" is alright except that "helps in some way" has been sold for the last 6 years, politically, as, "this is the reason you can't buy a home! Surely it has nothing to do with NIMBYism and our suburbs! Please don't ask me, as your elected representative, to take on suburban voters and start talking about housing equity as it relates to affordability!"

Every one of these things should be dealt with. Canada should probably have anti-racketeering laws. Real-estate boards should have less power and should be compelled to publicize their sales data. Etc, etc, ...

Just quit the bullsh*t about this being about addressing housing affordability.

> None of these things will matter one whit to housing affordability.

> "Helps in some way" is alright except that "helps in some way" has been sold for the last 6 years, politically, as, "this is the reason you can't buy a home! Surely it has nothing to do with NIMBYism and our suburbs! Please don't ask me, as your elected representative, to take on suburban voters and start talking about housing equity as it relates to affordability!"

That isn't what the commenter you originally replied to was stating, nor was it my position. While your argument may have merit, it's a non-sequitur when used as a rebuttal to either that commenter or myself.

> Just quit the bullsh*t about this being about addressing housing affordability.

I get it, you have a point you want to make. There are more constructive ways to do so than to misconstrue the arguments of the people you are replying to.

The poster is literally responding to a news article about housing affordability with the declaration about blind-bidding, "This is such a huge deal".

It really isn't. This is the difference between English vs Dutch auctions and the relative merits in an open and sane market can be debated. Sealed auctions are not a market failure. Sealed auctions do not necessarily lead to higher bids. Sealed auctions do not necessarily lead to market asymmetries. The effects of these two auction choices is largely irrelevant as long as we have the demand curve pushed out to crazy-town.

Do research on the property! One of the big advantages of Dutch auctions is that bidders don't get information on how you value something! Except of course that everything is valuable because of scarcity so yeah actually I guess sealed bids won't really provide a lot of value for the buyer.

Adjust your bid as others bid! English auctions allow you to make lots of adjustments based on what other bidders think something is worth! Oh, except of course everything is in demand so everyone just keeps bidding and the frenzy makes other participants unpredictable... so yeah, actually I guess open bids won't really provide a lot of value for the buyer.

I get it, you have a point you want to make. There are more constructive ways to do so than to misconstrue the arguments of the people you are replying to.

I'm really just tired of the bs.

> the real reason that housing is so expensive in popular cities, which is scarcity.

This isn't really true though. Housing is expensive everywhere, even in unpopular cities, even in cities losing population. (Except for a few specific cities), housing is not scarce, we just pretend it is because we pretend all these fake financial transactions count as valid 'demand'.

> we're focusing on foreign buyers in 2022. And blind-bidding in 2021. And investors in 2019. And money-laundering in 2018. And Chinese money in 2017. All of these things should be addressed, but every one of them has provided political cover for the real reason that housing is so expensive in popular cities, which is scarcity

And why is housing "scarce"? Because we waste housing on fake buyers (every single thing you just mentioned). That's why it's all in focus so much.

My midwestern city has built 2x to 3x more housing units than it's received in new residents, for almost 15 years straight now, and housing still goes up 15% each year like clockwork. You can outbuild new resident growth (many places already do), but you can never outbuild investor demand while housing is federally forced to appreciate like this.

I'm so sick of people bullsh*tting that 'zoning' and 'nimbys' are why housing is expensive, when we have dozens of major cities with no meaningful zoning restrictions, no 'nimbys', and no restrictions on growth or construction of any kind -- and even in these cities, housing is shit and expensive.

> This isn't really true though. Housing is expensive everywhere, even in unpopular cities, even in cities losing population.

Calgary? Its a hugely popular city, with a similar growth rate as vancouver and yet housing is much cheaper (relatively speaking)

Very true. The same house I just sold in Calgary for 400k is worth 1.2M in Vancouver and area. Which is why there is so much money coming from Vancouver and the GTA to Calgary and Alberta.

The growth of remote work, fuelled partly, but not entirely by the pandemic has supercharged our market which is two and a half hours outside the GTA. Such a temporary solution though because equilibrium will be achieved with or without Federal intervention. Sadly we won’t probably even get high speed rail transit to and from the GTA out of this.

>> All the market efficiency in the world won't stop the continual increase in prices from bad zoning and missing middle housing.

I disagree. Depending on the jurisdiction (in the US), part of the issue is the 10% net loss you end up with. 5-6% on the agent fee(s), another 1% on "mansion tax", in NYS/NYC there is a 1% and 1% transfer tax and 1/2% mortgage tax. Different jurisdictions are less (or more). Throw in more for the lawyer and you're down 10% on the sale. The sales agent fee seem fair for tough markets but even 1% sales agent fees seem preposterous given the market. If the house flips in 1 day, how is that worth 5 or 6%? These days people are negotiating that down to 4% but even that is preposterous given the market.

The problem with the extra 5 or 6% agent fees is: that people dont want to buy/sell as much, because you're effectively losing 20-30% of your 20% down equity on the sale (you'll lose more on the buy with the the 1-2% Title Insurance.) Effectively, you're losing half your 20% down equity.

Of course then...even if sellers want to sell, they dont because they need to bypass the frictional hurdles. Because if you sell and host half your 20% down equity, how the heck do you buy the next home?

All this is true and bad but the Canadian market is primarily driven by supply issues, not red tape. There just aren’t enough houses/condos.

The resulting price boom isn’t a mere 5-10% increase, but hundreds of percent over the course of only 5-10 years.

I’ve seen condo prices double three times in five years in places.

>> All this is true and bad but the Canadian market is primarily driven by supply issues, not red tape.

My point is that if you reduce the red tape (and deadweight loss) there are actually people who want to sell, but wont sell if they are losing a ton of money on the sale. Reduce the loss and more supply appears.

In the US this is a huge issue. If you switch cities twice and sell each time, your entire downpayment has disappeared in fees/taxes. You literally have nothing left to buy your next home with. So people stick around in houses they dont want in cities without ideal jobs because they have no choice.

When markets are rising so rapidly, there are very few people who might lose money on a sale. There’s a lot of fat in the process, but it’s not particularly relevant when prices are going up double digits each year.

That isn’t what’s happening in the Canadian market is what we’re telling you.

It is not that there are people that aren’t selling, it’s that there aren’t enough houses for the number of people in the country. House prices have risen enough to cover all of the fees, except that there is nowhere in the country you can move to where this isn’t happening.

Unless potential sellers are leaving the country or are choosing to rent after they sell, wouldn't more sellers also increase the number of buyers (because those sellers have to live somewhere else after they sell), and it all will end up being a wash?

(And if they are choosing to rent after they sell, that just shifts unaffordable home prices to unaffordable rents, as rental demand increases without a corresponding increase in supply.)

> All this is true and bad but the Canadian market is primarily driven by supply issues, not red tape. There just aren’t enough houses/condos.

You forgot cheap debt. There's also a ton of speculation. Jack up those interest rates and see where we're at.

Jack up interest rates to trigger a recession, and now not only do you still have a housing market that exists in its current form due to perpetual undersupply but with a recession on top.

Making it too expensive to buy a home does 'help' with prices, but it's more like treating the symptom than the cause. The result is there still isn't enough affordable housing in places where it is needed.

If raising interest rates causes a recession then we’re already in one and just pretending we’re not.

Consider the long term consequences of this debt economy. We’re just kicking the can down the road. It won’t magically get better. The sooner we (society) learn that massively over borrowing has consequences, the better.

I agree though that building more housing (or maybe radically changing the way housing works) should also happen. Maybe once everyone wakes up from this real estate debt fantasy there’ll be the political will to actually do something about it.

Average house price in Canada has ballooned. It’s like a crypto scheme, only instead of a bunch of shady YouTubers selling it, we have an entire industry of snake oil pushers. I don’t think your average Jane really gets how ridiculous it is… yet.

No one is required to pay a 5-6% commission. Use a discount real estate broker. You won't get much in the way of marketing or staging service, but in a hot market that hardly matters.

Looks like a valid for a non-canadian, why is this downvoted?

Because there are realtors here?

If the broker fee isn't worth it, then sell your house yourself. It's not that hard, but it's not zero work either. In addition, it's increasingly likely that many modern transactions involve a buyer and a seller broker, reducing their commission to half of whatever you pay.

I've sold 3 houses myself, and bought 3 without a broker.

In the US, The buyer AND the seller fees are paid by the seller. Even if you have no seller agent, you lose practically every buyer without a buyer agent because many agents will not show you a home not offering a fee. Its a shakedown.

I sold one of the 3 houses I've owned & sold to someone using a buyer broker. The broker reached out to negotiate the fee, and we settled on 2.5% (a bit too easily, I suspect I could have pushed it down to 2%). The last house I sold we almost sold via a buyer agent, and they did the same thing.

They are doing work, so the real question is whether you feel they are overcharging or not for whatever it is that they do.

Also, I think you meant to say "you lose practically every buyer WITH a buyer agent". This has not been my experience.

Market inefficiency would add an x% overhead on the price, but it doesn't uncontrollably increase the price. That's scarcity.

I mean scarcity defines value -- the reason gold or platinum are "valuable" is because of scarcity. That is it. Market inefficiency leads to unstable pricing, which for instance would be an "uncontrollably increase [of] the price."

For given supply and demand if market was efficient the price of housing should have been a constant. I am guessing of course here there is an increase in demand also. (Which is what you perhaps you might mean as "scarcity?" Scarcity however has a separate definition.)

Scarcity in my mind is a function of both supply and demand. Both low supply and high demand result in scarcity. In this case, supply and demand are both increasing, but one is way outpacing the other due to zoning laws. Even with perfect market efficiency, you still cannot make up for lack of supply caused by greedy home owners who don't allow any new constructions.

but... blind bidding is how everything works. If I was a CapEx manager at Y company, why would i reveal pricing of other bidders? It's a conflict of interest for the other bidders. Even if you were to keep the pricing entity private it's the opposite of efficient because creates this 'bit-wise' incremental bidding that destroys the price. Unless you did some kind of random candle auction, this is easily gamed for a such a high value asset like real-estate.

Are public stocks and bonds bought and sold with blind bidding?

In parts yes and in parts no.

There’s indeed an order book that’s “public enough”, but not every trading system enters every intent into the public order book. (Even as a retail nobody, I can create contingent orders that only become public orders once the trigger conditions are met.) I also don’t believe that individual bid/asks can be traced to a specific bidder.

Further, block trades are negotiated off-order-book and later reported.

I'd like to know more about all of this. Do you have any links?

> Even as a retail nobody, I can create contingent orders that only become public orders once the trigger conditions are met.

Do different brokers implement this differently, or is this an a property of the exchanges themselves?

The contingent or smart orders are implemented by brokers (E*Trade’s are different from Interactive Brokers) or in trading platforms. They are held outside the exchange until whatever trigger condition allows them to be expressed as an order directly supported (which introduces timing and other risks that they won’t work like a natively exchange-supported order).

In terms of links, I don’t have a ready primer to vouch for. I worked 6 years in online broker tech, but it was decades ago.

Stocks and bonds are traded something on the order of 1 million times more frequently than a given house, making price discovery much more transparent even without an open bidding process.

A free market doesn't require laws to enforce bans on bidding systems some people happen not to like..

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