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If every middle class single-family detached home in a sprawling metropolitan area like Los Angeles were each replaced with two luxury condos over a short period, would average real estate prices rise or fall? Would they go in one direction first and then the other direction later?

Or the opposite, if every two luxury homes were replaced by a single middle-class home occupying both parcels, would prices rise or fall?

I'm asking this because I'm wondering whether density or luxuriousness has the greatest effect on real estate prices. Knowing the answer to this would help to answer the question, "To solve the housing crisis, is it better to increase supply (even if it's luxury housing) or mandate affordable housing?"

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    $\begingroup$ Welcome to the site. I don't think your question can be answered unless you specify what you are assuming about demand for different types of homes (which could be something simple like "given the current pattern of demand"). Market prices depend on both supply and demand. $\endgroup$
    – Adam Bailey
    Oct 17, 2018 at 12:29
  • $\begingroup$ I don't want to assume anything. In the real world, is it equally likely that demand in this scenario could rise for each type of home as that it could fall? And that average home prices could rise as that they could fall? If that is the consensus of this Q&A community, then please post that as an answer and I will accept it. Thanks! $\endgroup$
    – snips-n-snails
    Oct 17, 2018 at 15:31

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After 2 weeks and no answers, I think it's fair to say that the odds of a average prices rising as a result of replacing each lower priced dwelling unit with 2 higher priced ones is roughly equal to the odds of prices falling (equal enough that nobody is willing to stake their reputation on a prediction).

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