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How about this alternative explanation: Unlike a real commodity such as fruit, people compete for houses and look carefully. This is because houses are in different locations, generally unique, limited and perhaps most importantly because they are the largest expense most buyers will every have.

Because there is competition a certain premium is paid. And if we assume further economical growth, the premium that an individual is capable of paying likewise should increase. Therefore, all things being equal, the prices should increase.



A primary input to the pricing function of a commodity is location. This applies to fruit, and it changes nothing about housing.

Source: career hedge fund commodities trader.




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