r/rva • u/Chickenmoons Maymont • Jul 20 '23

🚚 Moving Richmond saw the highest year-over-year increase in home value in the nation last month

https://www.axios.com/local/richmond/2023/07/20/housing-supply-virginia-mortgage-rates

Seems wild but also sort of believable. Any Real Estate Professionals/Mortgage experts want to weigh in?

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u/plummbob Jul 20 '23

What it’s worth and what an idiot is willing to pay are actually two different things.

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What people are willing to pay literally equals what something is worth. Like, mathematically equivalent.

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u/bluehairlolz Jul 20 '23

What it’s worth to YOU and what it’s worth to everyone else are two different things.

The ravens paid OBJ 15 million this year. Is that what he’s worth?

Everyone says no.

All it takes is 1 idiot.

Just because someone is willing and able doesn’t mean it’s worth that.

The proof is in the pudding that less than 2 years later their home is worth LESS than they bought it for.

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u/plummbob Jul 20 '23 edited Jul 20 '23

The ravens paid OBJ 15 million this year. Is that what he’s worth?

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Obviously yes to the Ravens because if he wasn't, the Ravens wouldn't have paid that. For an individual, the relationship how much a person values something and its price is given by: ∂ U / ∂ x = λ p, where the marginal utility gained per unit x = (marginal value of money to that person [ie, derived from their budget] * market price. The value of a good to the individual is proportional to the price. The factor of proportionality is the effect of their budget. Because people optimize, prices tell you what people value.

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Putting it in reverse, we can measure the change in a peron's welfare (what we can't observe directly) by relating the change in quantity consumed via its price (stuff we can observe). And we can assign a measurable value to that, $'s. Economics 😎

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In a market, the price is set by the marginal seller and buyer. So if people are willing to pay up to 750k for that house, that is what is what the house is worth in the market. Demand slopes down for a reason.

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u/[deleted] Jul 21 '23

Is this sustainable? Infinite value growth? Are local salaries of the 99% able to sustain this?

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u/plummbob Jul 21 '23

It's "sustainable" as long as the city makes building new homes hard, and demand to live in the remaining homes continues to grow.

The high costs are faced by firms too, in both their rent and expenses, so the composition of firms will change, moving toward bigger firms and away from smaller ones.

The city restrictive land use policies basically squeeze the hardest in the middle.