Oxtail_IHB
New member
TIC only has a monopoly on new homes so it's ability to influence the broader market is limited. As we saw recently, it's much easier for TIC to push prices down than to pull prices up. New homes make up only a fraction of total home sales, but they are viewed as a better product worth a premium over existing homes. A premium that's too large just drives buyers to existing homes. But pricing a premium product at or below expected price levels crashes the price floor and resets it at a lower level.
I'll use my car analogy from earlier, but for the sake of TIC and other Irvine fans, I'll have TIC represented by a mythical BMW-Benz-Lexus company which has a monopoly on luxury cars
. In a declining car market like we are currently in, a luxury car monopoly can set whatever price they want ABOVE the average price and not have much effect on general car prices. Imagine if they raised the price of their $55,000 car to $100,000. Would car prices across the board increase in lock step? I doubt we'd see the prices of Accords and Corollas going up just because someone jacked up the price of luxury cars. Someone who wasn't interested in paying the premium for a luxury vehicle(or a new home) in the first place is probably not going to pay more just because the premium went up. If production of all $60k+ cars stopped completely, would that cause the price of a Ford Focus to go up? Again, not likely.
Now imagine if they lowered their $55,000 car to $30,000. All of a sudden the landscape changes. Now Accords and Camrys have to take a hit in prices in order to compete. And as the top of the line moves down, all else has to move down as well. Much as the same that would happen if TIC significantly undercut current market prices with new offerings.
So, as you can see, a monopolist on the high end of a broader market has limited control over market prices. They can move prices down easily, but they have little ability to force prices up. And I don't consider simply refraining from tanking prices the same as manipulating to keep prices high.
Yes, there are a lot of differences between cars and houses, but the same dynamic can be seen in many other industries where a company has a monopoly only in the luxury segment of a broader market. Apple's premium(some say rip-off) pricing on their Macs have little impact on shrinking computer costs. They would have much more impact on computer prices by undercutting products that don't carry a luxury premium, but there's no reason they would ever do that.
I think TIC's effect on housing prices is an interesting topic and could make a great subject of an economic research paper. But when you start hearing words like "scumbag" and "pricks", you're talking emotion and not economics.
<strong>TL;DR version:</strong> A monopolist who only controls the luxury segment of a bigger market does not have that much price impact to the upside. They can drive prices down easily, but it's not really feasible for them to push prices up much.
I'll use my car analogy from earlier, but for the sake of TIC and other Irvine fans, I'll have TIC represented by a mythical BMW-Benz-Lexus company which has a monopoly on luxury cars
. In a declining car market like we are currently in, a luxury car monopoly can set whatever price they want ABOVE the average price and not have much effect on general car prices. Imagine if they raised the price of their $55,000 car to $100,000. Would car prices across the board increase in lock step? I doubt we'd see the prices of Accords and Corollas going up just because someone jacked up the price of luxury cars. Someone who wasn't interested in paying the premium for a luxury vehicle(or a new home) in the first place is probably not going to pay more just because the premium went up. If production of all $60k+ cars stopped completely, would that cause the price of a Ford Focus to go up? Again, not likely.Now imagine if they lowered their $55,000 car to $30,000. All of a sudden the landscape changes. Now Accords and Camrys have to take a hit in prices in order to compete. And as the top of the line moves down, all else has to move down as well. Much as the same that would happen if TIC significantly undercut current market prices with new offerings.
So, as you can see, a monopolist on the high end of a broader market has limited control over market prices. They can move prices down easily, but they have little ability to force prices up. And I don't consider simply refraining from tanking prices the same as manipulating to keep prices high.
Yes, there are a lot of differences between cars and houses, but the same dynamic can be seen in many other industries where a company has a monopoly only in the luxury segment of a broader market. Apple's premium(some say rip-off) pricing on their Macs have little impact on shrinking computer costs. They would have much more impact on computer prices by undercutting products that don't carry a luxury premium, but there's no reason they would ever do that.
I think TIC's effect on housing prices is an interesting topic and could make a great subject of an economic research paper. But when you start hearing words like "scumbag" and "pricks", you're talking emotion and not economics.
<strong>TL;DR version:</strong> A monopolist who only controls the luxury segment of a bigger market does not have that much price impact to the upside. They can drive prices down easily, but it's not really feasible for them to push prices up much.
