If there is evidence of that I'd love to see it. If this was true then we'd have a huge supply of homes all over America now which I think is not the case is it? All I hear about is undersupply driving up home prices despite demand being low. I live in Austin where this is very true so maybe I'm in a bit of a bubble?
The focus was turned from single-family housing to apartments, specifically luxury apartments as the luxury housing sector picked up steam quickly as developers and investors jumped on those properties when they were at their lowest prices. So "luxury" apartments were built at low-costs and purchased by investment firms. The main focus was for the builder to get their money back and more as quickly as possible, minimizing their risk, and the investors in the new complex got a bargain "luxury" property that they can increase rents quickly on, while ensuring demand since fewer and fewer single-family homes were being built.
The current issue of supply and demand for housing is, largely, artificially created, possibly accidentally. Single-family housing is just risky now, apartments are less risky. But as people are desiring yards and space again (due to COVID and WFH), we are now seeing the rental model extend to "build-to-rent" single-family communities.
U.S. GDP is north of $25 trillion and has grown 75% since 2009. Annual VC investments appear to be in the $200-300 billion range, from a quick search - presumably not all of it going to unprofitable SaaS companies. I'd go with the statistics over the gut intuition here.
Cumulative inflation since 2009 is 42.5%. Real GDP from Q3 2009 to Q3 2023 is up 37.8%[0], and that's with the base effect of 2009 having been a deep recession.
And looking deeper into the sector breakdowns, from 2009[1] to 2022[2], the lion's share of gains in GDP were from the information, finance, professional and business services, and government categories. Some, like manufacturing, have had no growth in real terms over that time.
The homeownership rate is lower now than in 2009[3]. Food is nearly 50% more expensive[4], higher than overall inflation. The cost to produce food is 51.8% higher[5]. Construction materials are 75% higher[6].
So yes, there are a lot of indications to suggest that proportionally, not as much capital was invested into the parts of the economy that are composed of atoms, not bits.
[0]: https://fred.stlouisfed.org/series/GDPC1
[1]: https://apps.bea.gov/scb/pdf/2012/05%20May/0512_industry.pdf
[2]: https://apps.bea.gov/iTable/?reqid=150&step=2&isuri=1&catego...
[3]: https://fred.stlouisfed.org/series/RHORUSQ156N
[4]: https://fred.stlouisfed.org/series/CPIUFDS
I’d say that the comparatively low inflation rate from 2010 to 2020 [1] qualifies as evidence of this.
> It sounds like a lot of it just went to unprofitable SaaS companies and other virtual endeavors, and not so much to things that exist in the physical world.
A lot of it did, I agree. But it would be strange if somehow no productive equipment at all was purchased based on a low-interest loan.
[1] https://tradingeconomics.com/united-states/inflation-cpi
This current level of interest rates was the norm before the money printing bonanza of 2010-2022. Only that ~decade of ultra low rates was the exception not the norm.
And yet housing was still being built back then. So what gives?
From what I saw from that last decade, ultra cheap rates for too long just leads to a bunch of speculation bubbles as everyone and his dog goes into debt as much as they can and inflating everything.
(Private equity is capitalizing on this by buying out local plumbing/electrician/hvac companies to merge them into full service companies with a call center, CRM for customers, tech-enabled scheduling and dispatch systems... which is all good, except they charge 2-3x higher rates compared to your local plumber... so the option is <call PE-owned plumbing company and pay 2-3x the price to have someone show up tomorrow> or <call 10 local plumbers and pray that 1 of them calls you back and actually shows up>)
I imagine house builders and contractors have more reliable networks of workers to draw on compared to the average homeowner. But maybe the availability of workers to build a house isn't what it used to be?
Watch the latest South Park episode:
Simple fact is that there aren't enough skilled people to actually build the houses.
I only asked how come we managed to build housing before the 2008 crash when the interest rates where like today.
And I fail to see what is absurd and obscene, except perhaps the inverse, that low interest rates caused such extreme market distortions that you have a massive company outside of the real estate industry looking into creating 15,000 homes. What is not absurd or obscene about that to you? We don't live in the company-town days any more (not that Google was trying to create a company-town, but they are, again, not in the real estate business).
I don't view this plan as ever being about "getting into real estate". It was just a way to get cities to agree to office construction, and also ensure that workers were willing/able to live nearby.
Anyway, given the amount of office space Google still owns and manages, they are very much "in real estate" in that regard...
There's not really much solution other than "people have to care about concrete policy, or at least specifically supply."
These are historically normal interest rates.