A lot depends on how the home construction market responds if this new technology catches on. With homes selling at 50 times yearly rent, the incentive to build more homes would be huge. Investment would flock to home construction, expanding supply and pushing down both prices and rents. The price-to-rent ratio would remain high, but because rents were falling, home prices would eventually come down to affordable levels.
On the other hand, if the supply of houses did not expand, then housing prices would remain elevated — and investors would eventually crowd out owner-occupiers in the housing market. The U.S. would become a nation of (mostly) renters.
A rigid supply of housing would also make prices more volatile. During good times housing prices would soar, just as they do in the stock market. In bad times prices would crash. That volatility could add permanent instability to the U.S. economy.
In either case, emerging technology has the potential to radically transform the economics of housing. It could lead to an expansion of supply, making housing more affordable; or it could result in the financialization of housing, the end of the owner-occupied era and new source of economic instability. Policy makers will have to keep an eye out for which scenario is emerging and what if anything they can do about it.
This article was provided by Bloomberg News.