Scott Adams asks how giving homebuyers money will cause home prices to rise.
Let me use a real life example to explain how that works. In 2009, Microsoft unveiled a new search engine. To get people to begin using it, they started a promotion. If you used Bing to arrive at a website and made a purchase, any purchase, on that website, you would get a ten percent discount (maximum $100) and you could do this once per day for ten days.
Armed with a new $10,000 credit card that offered zero percent interest and no payments for the first year, I bought 8 one ounce gold Eagle coins from Ebay. They were costing $1000 each, and with the discount, I managed to only pay $900 each for them. Why didn’t I buy ten? Because a lot of other people were doing it, and the coins had risen in price quickly and it was no longer a deal. In les than two weeks’ time, the price of gold Eagles went from $1000 to over $1100, even though the price of gold didn’t move.
Why did that happen? Because the demand side of the supply/demand equation was pressured, while supply remained the same.
The coins: I held on to them for almost a year, sold them for $1800 each, used the proceeds to pay the credit card off, and walked away after doubling my money- well, their money. I made $8k using the credit card’s money.
9 Comments
Nolan Parker · September 9, 2024 at 5:43 pm
The YouTube guy, the Beast or some such, recently gave an entire village each a years wages.
I’m hoping for regular updates, because I figure it’s going to screw the place Up..Will robbery and burglary become a problem? Do they even have a mud hut with Bank on it, to put this newfound wealth in? How will this affect trade between the villagers? Everyone Knows the person buying isn’t exactly broke.
The same goods and services and a sudden increase in the currency chasing them should create rising prices, if I’m thinking right.
It's just Boris · September 10, 2024 at 7:37 am
I think there was even a Futurama episode about this. Everyone got $300 Trick Dick Fun Bucks. The dollar store went to the $301 store.
Don Curton · September 10, 2024 at 7:39 am
Hell, I predict housing will go up even more than $25k. You are now going have that many more people entering the market looking for a house because now they have a free $25k to spend. That means the demand side goes up, and the demand side has an extra $25k to spend, for the same size supply.
J J · September 10, 2024 at 7:46 am
The politicians never worry about cause and effect when pandering to voters.
Man, it’s so easy to be a politician and just make up stuff that stupid voters will fall for.
As shown by multiple smack downs of Biden’s college loan forgiveness voter enhancement the President cannot just create spending out of thin air. That’s CONgress’ job (and they excel at it).
jimmyPx · September 10, 2024 at 8:36 am
This idea that “everyone should own a home” is as stupid as “everyone should go to college”.
Regarding college, 40 years ago+ only 25% of the population went to college because the other 75% either didn’t have the intelligence needed, preparation necessary or desire to go. Now the standards are so low any dumbass can and does go and college degrees have become almost worthless.
Ditto buying a house. I currently own my 4th house and I realized long ago that many are not capable of home ownership either due to financials or willingness to keep up the property.
Owning a house, you HAVE to pay the mortgage in full every month or bye bye house.
Next, a house ALWAYS has work and expense involved. The yard MUST be kept up and any repairs must be made or soon the house will look like a POS and start running down.
People not taking care of their houses and property is why there are HOAs all over the place.
Giving people who are not capable of home ownership a house is going to lead to the 2008 mess all over again and these poor people will lose what little money they had plus have broken dreams and sorrow when they lose that house.
SiG · September 10, 2024 at 9:38 am
I’m surprised Scott Adams is that ignorant. Maybe he’ll be incentivized to go read some “real money” economists like Friedman or Hayek.
Unless he meant, like Don Curton said above, “you think prices will only go up $25k?” In which case, sorry Scott.
WallPhone · September 10, 2024 at 9:55 am
Remember when federalizing student loans was supposed to make college affordable?
Pepperridge farm remembers.
Unknownsailor · September 10, 2024 at 4:44 pm
Ask anyone who has tried to rent an apartment in any town next to a military base. What sets the monthly rent? The prevailing rate of Basic Allowance for Housing paid by the military. Why? That is the market rate, no matter what anyone says.
So it would go with this $25k subsidy, the market rate for real estate would almost instantly go up that amount, all across the nation.
Brutus · September 11, 2024 at 12:15 pm
My guess is the price would go up, but not by 25k, because this would only assist 1st time home buyers. So people buying a 2nd home will pay, say, 15k more while first time buyers get a net 10k benefit. It’s essentially a wealth transfer.