This is fascinating reading. I'll comment more later but the third markets, the growing sunbelt cities with little regulation or planning, the historical price of housing is tied closely to the price of development as when prices rise, developers build more supply to take advantage of higher prices. As the supply increases again, prices drop back to the historic multiplier times builder costs. This is why the speculative price boom in Vegas is not sustainable. NY is a different story. Chicago is somewhere in between. Detroit and the Rust Belt are in a different category.
An Instructive Paper on the Housing Bubble and Real Estate Prices
This is fascinating reading. I'll comment more later but the third markets, the growing sunbelt cities with little regulation or planning, the historical price of housing is tied closely to the price of development as when prices rise, developers build more supply to take advantage of higher prices. As the supply increases again, prices drop back to the historic multiplier times builder costs. This is why the speculative price boom in Vegas is not sustainable. NY is a different story. Chicago is somewhere in between. Detroit and the Rust Belt are in a different category.
http://www.economics.harvard.edu/faculty/glaeser/files/bubbles10-jgedits-NBER%20version-July%2016,%202008.pdf
http://economix.blogs.nytimes.com/2008/09/30/housing-prices-in-the-three-americas/
thanks
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