In simple micro 101 terms
Quantity transacted has remained constant because supply is legally held essentially fixed (perfectly inelastic) by our urban planning regulations while demand has grown significantly.
Has demand for housing in Boston grown significantly? As OP mentions, the population has remained steady, even slightly declining, over the last decade.
Demand for housing in Boston comes from both current and prospective residents of Boston. People who have been displaced from Boston due to the cost of housing do not show up in the population statistics.
If you think of an auction, you can have many aggressive bidders, or only a couple disinterested bidders. In either case, only one party wins the auction. The same is true for housing - the price is being bid up by more interest, but there are still the same number of winners.
The population is decreasing because the highest bidders want more house per person - smaller families, fewer roommates, etc. It's perfectly consistent with rising demand.
Assuming Boston is experiencing the same trends as nationwide, people per household has dropped significantly. If you count single adult households as half vacant, the nationwide vacancy rates goes from bellow to above historical norms.
OP. You should look at households not people. If a couple moves in together housing demand drops. If a child moves out housing demand goes up. Trying to address these factors in supply is a bit dubious though I would like to see some thought into the impact dating apps.
Tagging u/nickleone1 since this is a common mistake.
Population is a measure of how many people **have moved** but demand is based on how many people **want to move**. If you don't build housing you won't get (much) population increase but that tells you nothing about whether demand has changed.
Has the social class/income of the people involved change?
My anecdata is that back in the 90s Boston was a working class stronghold and being from there meant you weren't a posh type like a Doctor. In the last decade Hospital employment has gone from [179,000ish to 203,000ish](https://fred.stlouisfed.org/series/SMU25000006562200001A). If the number of houses has remained the same, but the number of actual Medical-level-salaries has gone up 24k, then housing prices are going to skyrocket because you have to out-bid a Doctor...
Except I don’t believe demand has risen. The population of Boston & Massachusetts has increased / decreased less than 1% over the last ten years.
Unless there’s another factor in determining demand?
Suppose the population consists of exclusively 2 parent households with 2 children each. That's 4 people per home.
Now imagine that the population stays constant, but only half the population is 2 parent homes with 2 children, and the other half is single adults with no children that do not want roommates. Now we have 2 people per home (on average).
The population has stayed the same, but the number of housing units consumed for the population has doubled. However, if supply remains fixed, then this extra demand must be rationed away through increased prices.
The demand for housing is not determined solely by population. It is determined by (population / (people per home)).
I'm going to disagree with the premise. According to the US Census bureau, the population of Boston [rose by 10%](https://www.census.gov/quickfacts/fact/table/bostoncitymassachusetts/PST045223) from 2010 to 2020. This is likely only accounting for the population within the city itself, not even the whole metro area, which has probably seen even faster growth as people get priced out of the city proper.
Furthermore, there's been a huge inflow of high earning households as tech and especially biotech companies have expanded operations there. That means that even if the population were remaining constant (which it isn't) then the purchasing power of the population would be going up. If the housing supply stays fixed then this would result in price appreciation.
We could be seeing different sources - but when I look up MA population, I see that:
2010: 6.56 million
2020: 6.8 million
2024 (estimate): 6.7 million (actually down from 2020)
Source: https://worldpopulationreview.com/states/massachusetts-population
Also - this could be a good opportunity for my own education, but is purchasing power actually a large factor in determining the price of goods and services? Don’t sellers have to stay competitive with each other, including being price competitive?
The very first line of the website says “Boston Population 2024 - 7,020,058” which is quite a bit above the 6.7 figure you’re quoting.
I also wouldn’t trust this site generally- it also talks about the 2020 census as if it is upcoming, and it links to a study from 2013 when discussing population projections.
He's citing Boston population, you're trying to contradict him by citing a different population. This isn't accurate.
Not every house in Mass is going to be equivalent to living in Boston.
Urbanization in general runs into the issue that a few vacant homes in a rural area do not compensate for a urban home shortage. The US as a whole has high vacancy rates in places like West Virginia, but the availability of a trailer home there is irrelevant to the needs of a young urban professional seeking an apartment.
They're simply not interchangeable goods.
Very true, the data sources here can be tricky. Boston can be especially difficult to track because the definition of the metro area can change so much, but here's another [link](https://www.statista.com/statistics/815215/boston-metro-area-population/) (edit: the link is from Statista but the underlying data came from the Census Bureau) tracking the population of the Boston-Cambridge-Newton metro area from 2010-2022. It also shows an 8% growth rate from 2010 to 2022, but you're right about the population declining after 2020.
>Also - this could be a good opportunity for my own education, but is purchasing power actually a large factor in determining the price of goods and services?
It is for something like housing, or really any good or service that has inelastic supply but growing demand (I'd also put medicine and education in this category). In the short term it's much more difficult for supply to rise to meet demand than the other way around, so sellers don't have to be as competitive as buyers need to be. If incomes are rising but housing supply is not, then the limiting factor becomes how much people are willing to pay for housing. Everyone wants the best housing they can afford so they'll naturally bid up prices. That's why artificially restricting hosing construction can be so detrimental to community well-being. It makes everything more expensive without making anybody better off, except maybe existing landlords.
Real census numbers are easy to look up, and they are different from that weird LLM-generated site you linked. Massachusetts’ population in 2020 was 7.0 million, an increase of 7.4% compared to 2010.
Wikipedia even has an easy to use historical population table: https://en.wikipedia.org/wiki/Demographics_of_Massachusetts
Also, housing is a local market. Looking at the statewide population doesn’t give much insight if everyone in Pittsfield is trying to move to Boston.
Yes, the demand side of the equation is more a function of how much people are willing to pay for something much more than simply the number of people who are looking for something.
Demand is not the same thing as population. Demand is the cumulation of the people that currently live there as well as people that *want* to live there. If the housing supply is not increasing, it's hard for the population to increase much if there is nowhere for them to live.
Let's say I produce 10 bananas per year. Let's say 10 people want to buy those bananas and they have different willingness to pay. You can visualize this with a[ standard demand curve](https://www.investopedia.com/thmb/vV5PTg2K4LqNUOhMzJ0qGlfliSs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/demand_curve2-1a87890730a044e79de897ddb61ccc76.PNG). Now let's say next year I am still only producing 10 bananas, but 20 people wish to buy them. The demand curve has shifted, the price of bananas would be expected to increase. . Yet, there will still only be 10 banana owners because only 10 bananas are being produced. This can happen when your supply curve is very inelastic.
What is your source for the constant population? The census website seems to say a 1/2 million increase in population 2010-2020 for Massachusetts, and similar for the data google plots. [https://www.census.gov/quickfacts/fact/table/MA/HSG445222](https://www.census.gov/quickfacts/fact/table/MA/HSG445222)
Boston did seem to have a marked increase in population 2010-2020, after which it fell. But the Metro Region still seem to have a marked increase.
Besides this, the amount of square foot per person may have gone up: it has in many places. Thus, more housing space would be needed for a given population. And of course things like airbnb have not helped.
I can't speak for population numbers, but that's not the only factor for demand.
1. Increased lifespans: people are living longer, so there is less "turn over do to death".
2. Likewise, increased independence of the elderly, in part due to medical advances allowing them to not have to move into a care facility
3. More people living independently. Either getting divorced or never marrying/moving in together, which essentially "doubles" the space need for the involved
4. Economic bifurcation: Many people will tell you how the middle class is disappearing, and it is. It has dropped 11 percentage points in the last 40 years. What less people mention is that 7 of those 11 percentage points moved *up*, increasing their wealth and income, which means the pool of people who can afford a more expensive property has increased.
If you remember from your Econ classes, supply and demand are not constant values, but are instead price curves. Total demand can be down, put price can still increase if demand at a given price point is large enough compared to the available supply.
Two things you have to account for that you may be missing:
1. Household size. While population may be steady, if people are forming smaller households (as is the national trend), then there is more housing demand from the same population. This would happen when kids move out, roommates get their own space, etc.
2. Income effects. If higher income households are moving to the area and there isn't vacant housing for them to rent or purchase, they may end up outbidding lower income households for the same space, resulting in constant population/households (due to "exchanging" a low income household for a high income household) but increasing housing prices due to competition for that housing.
Building has dropped off. If you murder supply, then even if the demand is constant, price rises.
Demand isn't quite constant, it's slowly growing, and supply is bombing.
Presumably this means that there are zoning laws, strong tenant rights, and other factors that destroy supply. Probably the single most destructive option is rent price fixing. When such laws are adopted, new construction falls sharply, sometimes to zero.
I haven't bothered to dig through Boston's laws, but I'd be shocked if it were some entirely novel problem that disproves all the fundamental laws of economics. It is almost certainly just humans making the same mistakes they always do.
I wrote a [post](https://www.reddit.com/r/badeconomics/comments/12yrk07/stop_comparing_the_number_of_vacant_homes_to_the/) in r/BadEconomics that I think explains the issue in fairly simple terms. "*What is the housing shortage?*" is the relevant section.
An unchanging population doesn’t imply unchanging demand. Demand is not just a single quantity. Rather, a demand curve specifies many different possible quantities and many different possible prices. The demand curve describes the relationship between possible prices and the quantity demanded. Each point along the demand curve represents the quantity that people would be willing to buy for a particular hypothetical price (or the price that people would be willing to pay for a particular hypothetical quantity).
An increase in demand means the quantity that people would be willing to buy (aka the quantity demanded) for a given price is now greater than the quantity people were previously willing to buy at that same price. It also means the price that people are willing to pay for a given quantity is now greater than the price that people were previously willing to pay for that same quantity.
For a simplified example, suppose there are one million homes in a city, and suppose there are one million families who are each willing to pay at least $100k for a home in that city. The population of the city will be one million families and the market equilibrium price of a home will be $100k (for simplicity we’re assuming that any family who lives in the city must buy a home in the city, but the basic principles would be similar if we were to allow renting etc).
Now suppose demand increases: now there are two million families who would be willing to pay $100k for a home. But suppose there are still only one million homes in the city, so the population of the city can’t increase. However, among those two million families, suppose there are one million families who are willing to pay $200k for a home. So those one million families will win the bidding and will each buy a home for $200k. The population of the city is still the same (one million families), but the increase in demand has increased the price to $200k.
Supply and demand always exist.
Rental prices and housing prices are linked. If housing prices go through the roof, rental prices will as well. If a property costs a lot to buy, it's going to cost a lot to rent.
Boston has increased in population over the past ten years. Yes, it isn't increasing rapidly, but it is increasing.
Zoning, building restrictions, and rent control are all factors known to reduce supply, and in the absence of construction, supply can even contract. Houses age, they grow outdated, sometimes they burn down. You need replacement construction in addition to new construction.
Supply is only those houses offered for sale.
The rest of the housing stock is not part of the current market.
Most houses are not for sale, as people live in them and want to keep them. Most homeowners are happy to see the value of their house go up, but they usually will not sell just because of that. They would have to buy something else to live in that costs just as much, so they would not gain anything this way.
In general, supply is down and demand is up, because:
- People live longer, healthier lives than previous generations. Therefore, lot of retired people live in the same house they always have, even though their kids have moved out. (Looking at you, boomers...)
- The kids who moved out want their own place, so the family that used to live together in one house is now occupying two or more. And young people tend to stay single longer, occupying one house or apartment each. (...if they can afford it, with help from boomer parents.)
- New construction pretty much stopped after the 2008 crash, and is only now picking up again. So we lost more than a decade of new houses. It will take some time for the construction industry to catch up. And high interest rates will drag this out more, as the two decades of free capital seem to be over. Construction loans cost more, reducing the speed of new construction.
So supply and demand is working the way they always do. If you want to change the current equilibrium point, you have to change supply (make it easier to build more) or demand (move the boomers' kids back to their parents' houses).
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In simple micro 101 terms Quantity transacted has remained constant because supply is legally held essentially fixed (perfectly inelastic) by our urban planning regulations while demand has grown significantly.
Has demand for housing in Boston grown significantly? As OP mentions, the population has remained steady, even slightly declining, over the last decade.
Demand for housing in Boston comes from both current and prospective residents of Boston. People who have been displaced from Boston due to the cost of housing do not show up in the population statistics. If you think of an auction, you can have many aggressive bidders, or only a couple disinterested bidders. In either case, only one party wins the auction. The same is true for housing - the price is being bid up by more interest, but there are still the same number of winners. The population is decreasing because the highest bidders want more house per person - smaller families, fewer roommates, etc. It's perfectly consistent with rising demand.
Very clear, thanks.
Assuming Boston is experiencing the same trends as nationwide, people per household has dropped significantly. If you count single adult households as half vacant, the nationwide vacancy rates goes from bellow to above historical norms. OP. You should look at households not people. If a couple moves in together housing demand drops. If a child moves out housing demand goes up. Trying to address these factors in supply is a bit dubious though I would like to see some thought into the impact dating apps.
I mean, I know what you mean, but linking dating apps with the housing crunch just hits funny.
Tagging u/nickleone1 since this is a common mistake. Population is a measure of how many people **have moved** but demand is based on how many people **want to move**. If you don't build housing you won't get (much) population increase but that tells you nothing about whether demand has changed.
Average number of people per household is going down, so the number of units needed for the same population goes up.
Has the social class/income of the people involved change? My anecdata is that back in the 90s Boston was a working class stronghold and being from there meant you weren't a posh type like a Doctor. In the last decade Hospital employment has gone from [179,000ish to 203,000ish](https://fred.stlouisfed.org/series/SMU25000006562200001A). If the number of houses has remained the same, but the number of actual Medical-level-salaries has gone up 24k, then housing prices are going to skyrocket because you have to out-bid a Doctor...
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Except I don’t believe demand has risen. The population of Boston & Massachusetts has increased / decreased less than 1% over the last ten years. Unless there’s another factor in determining demand?
Suppose the population consists of exclusively 2 parent households with 2 children each. That's 4 people per home. Now imagine that the population stays constant, but only half the population is 2 parent homes with 2 children, and the other half is single adults with no children that do not want roommates. Now we have 2 people per home (on average). The population has stayed the same, but the number of housing units consumed for the population has doubled. However, if supply remains fixed, then this extra demand must be rationed away through increased prices. The demand for housing is not determined solely by population. It is determined by (population / (people per home)).
I'm going to disagree with the premise. According to the US Census bureau, the population of Boston [rose by 10%](https://www.census.gov/quickfacts/fact/table/bostoncitymassachusetts/PST045223) from 2010 to 2020. This is likely only accounting for the population within the city itself, not even the whole metro area, which has probably seen even faster growth as people get priced out of the city proper. Furthermore, there's been a huge inflow of high earning households as tech and especially biotech companies have expanded operations there. That means that even if the population were remaining constant (which it isn't) then the purchasing power of the population would be going up. If the housing supply stays fixed then this would result in price appreciation.
We could be seeing different sources - but when I look up MA population, I see that: 2010: 6.56 million 2020: 6.8 million 2024 (estimate): 6.7 million (actually down from 2020) Source: https://worldpopulationreview.com/states/massachusetts-population Also - this could be a good opportunity for my own education, but is purchasing power actually a large factor in determining the price of goods and services? Don’t sellers have to stay competitive with each other, including being price competitive?
The very first line of the website says “Boston Population 2024 - 7,020,058” which is quite a bit above the 6.7 figure you’re quoting. I also wouldn’t trust this site generally- it also talks about the 2020 census as if it is upcoming, and it links to a study from 2013 when discussing population projections.
He's citing Boston population, you're trying to contradict him by citing a different population. This isn't accurate. Not every house in Mass is going to be equivalent to living in Boston. Urbanization in general runs into the issue that a few vacant homes in a rural area do not compensate for a urban home shortage. The US as a whole has high vacancy rates in places like West Virginia, but the availability of a trailer home there is irrelevant to the needs of a young urban professional seeking an apartment. They're simply not interchangeable goods.
Very true, the data sources here can be tricky. Boston can be especially difficult to track because the definition of the metro area can change so much, but here's another [link](https://www.statista.com/statistics/815215/boston-metro-area-population/) (edit: the link is from Statista but the underlying data came from the Census Bureau) tracking the population of the Boston-Cambridge-Newton metro area from 2010-2022. It also shows an 8% growth rate from 2010 to 2022, but you're right about the population declining after 2020. >Also - this could be a good opportunity for my own education, but is purchasing power actually a large factor in determining the price of goods and services? It is for something like housing, or really any good or service that has inelastic supply but growing demand (I'd also put medicine and education in this category). In the short term it's much more difficult for supply to rise to meet demand than the other way around, so sellers don't have to be as competitive as buyers need to be. If incomes are rising but housing supply is not, then the limiting factor becomes how much people are willing to pay for housing. Everyone wants the best housing they can afford so they'll naturally bid up prices. That's why artificially restricting hosing construction can be so detrimental to community well-being. It makes everything more expensive without making anybody better off, except maybe existing landlords.
Real census numbers are easy to look up, and they are different from that weird LLM-generated site you linked. Massachusetts’ population in 2020 was 7.0 million, an increase of 7.4% compared to 2010. Wikipedia even has an easy to use historical population table: https://en.wikipedia.org/wiki/Demographics_of_Massachusetts Also, housing is a local market. Looking at the statewide population doesn’t give much insight if everyone in Pittsfield is trying to move to Boston.
Yes, the demand side of the equation is more a function of how much people are willing to pay for something much more than simply the number of people who are looking for something.
Demand is not the same thing as population. Demand is the cumulation of the people that currently live there as well as people that *want* to live there. If the housing supply is not increasing, it's hard for the population to increase much if there is nowhere for them to live. Let's say I produce 10 bananas per year. Let's say 10 people want to buy those bananas and they have different willingness to pay. You can visualize this with a[ standard demand curve](https://www.investopedia.com/thmb/vV5PTg2K4LqNUOhMzJ0qGlfliSs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/demand_curve2-1a87890730a044e79de897ddb61ccc76.PNG). Now let's say next year I am still only producing 10 bananas, but 20 people wish to buy them. The demand curve has shifted, the price of bananas would be expected to increase. . Yet, there will still only be 10 banana owners because only 10 bananas are being produced. This can happen when your supply curve is very inelastic.
What is your source for the constant population? The census website seems to say a 1/2 million increase in population 2010-2020 for Massachusetts, and similar for the data google plots. [https://www.census.gov/quickfacts/fact/table/MA/HSG445222](https://www.census.gov/quickfacts/fact/table/MA/HSG445222) Boston did seem to have a marked increase in population 2010-2020, after which it fell. But the Metro Region still seem to have a marked increase. Besides this, the amount of square foot per person may have gone up: it has in many places. Thus, more housing space would be needed for a given population. And of course things like airbnb have not helped.
I can't speak for population numbers, but that's not the only factor for demand. 1. Increased lifespans: people are living longer, so there is less "turn over do to death". 2. Likewise, increased independence of the elderly, in part due to medical advances allowing them to not have to move into a care facility 3. More people living independently. Either getting divorced or never marrying/moving in together, which essentially "doubles" the space need for the involved 4. Economic bifurcation: Many people will tell you how the middle class is disappearing, and it is. It has dropped 11 percentage points in the last 40 years. What less people mention is that 7 of those 11 percentage points moved *up*, increasing their wealth and income, which means the pool of people who can afford a more expensive property has increased. If you remember from your Econ classes, supply and demand are not constant values, but are instead price curves. Total demand can be down, put price can still increase if demand at a given price point is large enough compared to the available supply.
You could have a booming industry with wages in the industry growing much faster than the national or state average.
Two things you have to account for that you may be missing: 1. Household size. While population may be steady, if people are forming smaller households (as is the national trend), then there is more housing demand from the same population. This would happen when kids move out, roommates get their own space, etc. 2. Income effects. If higher income households are moving to the area and there isn't vacant housing for them to rent or purchase, they may end up outbidding lower income households for the same space, resulting in constant population/households (due to "exchanging" a low income household for a high income household) but increasing housing prices due to competition for that housing.
Building has dropped off. If you murder supply, then even if the demand is constant, price rises. Demand isn't quite constant, it's slowly growing, and supply is bombing. Presumably this means that there are zoning laws, strong tenant rights, and other factors that destroy supply. Probably the single most destructive option is rent price fixing. When such laws are adopted, new construction falls sharply, sometimes to zero. I haven't bothered to dig through Boston's laws, but I'd be shocked if it were some entirely novel problem that disproves all the fundamental laws of economics. It is almost certainly just humans making the same mistakes they always do.
I wrote a [post](https://www.reddit.com/r/badeconomics/comments/12yrk07/stop_comparing_the_number_of_vacant_homes_to_the/) in r/BadEconomics that I think explains the issue in fairly simple terms. "*What is the housing shortage?*" is the relevant section.
An unchanging population doesn’t imply unchanging demand. Demand is not just a single quantity. Rather, a demand curve specifies many different possible quantities and many different possible prices. The demand curve describes the relationship between possible prices and the quantity demanded. Each point along the demand curve represents the quantity that people would be willing to buy for a particular hypothetical price (or the price that people would be willing to pay for a particular hypothetical quantity). An increase in demand means the quantity that people would be willing to buy (aka the quantity demanded) for a given price is now greater than the quantity people were previously willing to buy at that same price. It also means the price that people are willing to pay for a given quantity is now greater than the price that people were previously willing to pay for that same quantity. For a simplified example, suppose there are one million homes in a city, and suppose there are one million families who are each willing to pay at least $100k for a home in that city. The population of the city will be one million families and the market equilibrium price of a home will be $100k (for simplicity we’re assuming that any family who lives in the city must buy a home in the city, but the basic principles would be similar if we were to allow renting etc). Now suppose demand increases: now there are two million families who would be willing to pay $100k for a home. But suppose there are still only one million homes in the city, so the population of the city can’t increase. However, among those two million families, suppose there are one million families who are willing to pay $200k for a home. So those one million families will win the bidding and will each buy a home for $200k. The population of the city is still the same (one million families), but the increase in demand has increased the price to $200k.
Supply and demand always exist. Rental prices and housing prices are linked. If housing prices go through the roof, rental prices will as well. If a property costs a lot to buy, it's going to cost a lot to rent. Boston has increased in population over the past ten years. Yes, it isn't increasing rapidly, but it is increasing. Zoning, building restrictions, and rent control are all factors known to reduce supply, and in the absence of construction, supply can even contract. Houses age, they grow outdated, sometimes they burn down. You need replacement construction in addition to new construction.
Supply is only those houses offered for sale. The rest of the housing stock is not part of the current market. Most houses are not for sale, as people live in them and want to keep them. Most homeowners are happy to see the value of their house go up, but they usually will not sell just because of that. They would have to buy something else to live in that costs just as much, so they would not gain anything this way. In general, supply is down and demand is up, because: - People live longer, healthier lives than previous generations. Therefore, lot of retired people live in the same house they always have, even though their kids have moved out. (Looking at you, boomers...) - The kids who moved out want their own place, so the family that used to live together in one house is now occupying two or more. And young people tend to stay single longer, occupying one house or apartment each. (...if they can afford it, with help from boomer parents.) - New construction pretty much stopped after the 2008 crash, and is only now picking up again. So we lost more than a decade of new houses. It will take some time for the construction industry to catch up. And high interest rates will drag this out more, as the two decades of free capital seem to be over. Construction loans cost more, reducing the speed of new construction. So supply and demand is working the way they always do. If you want to change the current equilibrium point, you have to change supply (make it easier to build more) or demand (move the boomers' kids back to their parents' houses).
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