E The Real Problem With Real Estate Understood By Market Monetarists

The real problem with real estate as understood by Market Monetarists requires understanding the concept of closed access versus open access cities. No, I am not talking about cities with restricted travel because there is a military base on the city, as we see in the old Soviet Union or even in modern Russia. For purposes of real estate, closed access cities are those that produce high quality products through having a highly trained workforce.

Salaries are high in closed access cities. It is difficult to move to a closed access cities as even rents are very high. Some tech people have actually lived in the Google parking lot because of cost. The Tiny House movement seeks an escape from closed access cities or at least an escape from their high living costs. Multigenerational households have increased in closed access cities

And poor people try to get away from closed access cities, as we see in this discussion by MM Kevin Erdmann, who has done lots of research on the issue.

The Market like Erdmann, Sumner and Benjamin Cole want more building in closed access cities. I could almost buy into that if the governments would improve the roads, but really, what could be done with the 405 in Los Angeles? You think traffic is bad now. Wait till they build massive projects in SF, or in Santa Monica! And you have the problem of building high rises in earthquake prone closed cities up and down the west coast.

But if access to these cities is closed, upward mobility becomes an issue. As Erdmann says in the article cited above, there are pockets of abject poverty interspersed within the gentrified whole in the closed cities.  

Skid Row Los Angeles (Wikipedia)

We had seen riots in those cities in the past. We have noted that those cities have serious issues of rich and poor more than other cities. At least in open access cities, people could have a chance of finding a job and afford to get to it. Even transportation costs in closed access cities are a barrier to work for the poor that live there.

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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