It seems that it recent years housing has become virtually unattainable in most major metropolitan areas in the U.S., particularly on the east and west coasts. I have been interested in this subject for a while but I haven't uncovered much interesting research as to why this has happened. Has anyone done any research on this topic? What theories can explain this?
Housing prices have doubled everywhere in the first world in the past five years. It started in Britain and Australia, spread to the USA, Canada, continental Europe, it's all over the place. A 3 bedroom apartment in the 19th arrondissement of Paris is priced 2,000,000EUR. Even New York isn't that expensive.
http://www.economist.com/opinion/dis...ory_id=4079027
This is from June of last year. We are in burst mode today.
Yet our houses continue to get bigger and bigger (the average home is 55% bigger today than in 1970 while average family size has decreased 13%) and the homeownership rate (69%) is the highest it has ever been.
Wouldn't one expect a market where prices are "virtually unattainable" to be one where people downsize the size of their house, and a lot of people can't afford to buy? Of course not! There are all sorts of economic incentives to buying the most expensive house possible. It's the American dream, dog golly!
For someone my age (24) living in a major Metropolitan area (DC) where housing prices seem to rise daily, even now in areas that I never thought would ever become appealing to the speculative buyer, this phenomenon is quite daunting. Having just taken a pay cut to move into the policy research sector, it's looking as if it may be a decade or so before I'll even be able to consider buying a home within an hour of city center.
Praying that the bubble will burst....
You've put your finger on a proximate cause of the bubble (at least for Americans): Bigger cars (SUV's), bigger stores (Walmart), and bigger appetites for stuff (made possible by larger Sq footage of houses), are all feeding off of each other in an orgiastic chain reaction. Gradually rising house prices are normal. Absent the trend toward bigger cars and bigger stores, I think demand would be much closer toward the 1970 house size. Prices would still have gone up a lot, but not nearly as inflated as they are today.Originally posted by passdoubt
As to why the trend has occured internationally in first world countries as pointed out by Jaws, I speculate it has something to do with demographic trends; i.e. economy adjusting to lowered birth rate; and remnants of WWII baby-boom influences.
"The current American way of life is founded not just on motor transportation but on the religion of the motorcar, and the sacrifices that people are prepared to make for this religion stand outside the realm of rational criticism." -Lewis Mumford
That's not at all true. housing is still plentiful and cheap in many places (not Boston, San Francisco, or Manhattan of course, but in most places).
Real Estate is virtually unattainable. But just because one can not own real estate does not mean that one does not have access to housing. Real Estate is being driven by speculation and I think that prices are unsustainable and will be corrected in many regions (including Chicago) but that does not mean that housing is unavaliable.
EDIT: To be honest, real estate isn't even that bad if you're smart. I have six friends who went in together on a building in Little Village and turned it into a Co-op. The total cost averaged 150k-200k a peice, based upon the size of the unit (one to two bedrooms). These are not wealthy people, middle-middle class sorts, but they had no trouble getting that kind of money together. The important thing is to not chase trends and not be obsessed with "resale value." I think there are some people right here on cyburbia that buy way more house than they need with the belief that they'd get a bigger ROA when they sell it.
Reality does not conform to your ideology.
http://neighborhoods.chicago.il.us Photographs of Life in the Neighborhoods of Chicago
http://hafd.org/~jordanb/ Pretentious Weblog.
I was referring to home ownership in the major U.S. metro areas (Boston, anywhere in CA, Chicago, Seattle, DC, S. Florida). There is a direct link between real estate and housing. Is renting "plentiful or cheap" in these places? I think not.
You know, we might be operating on different assumptions about what constitutes "unattainable."
Rents and real estate will always be much higher (especially on a per-square-foot basis) in large cities than out in podunk. It's a simple case of supply and demand. Part of living in a great city is having less space. If by "housing" you mean a four bedroom house with a three and a half car garage, then yes, that is very expensive in major metropolises.
But the fact remains that there is a great deal of housing that that is attainable to even people who don't make a great deal of money (like myself) in a city like Chicago.
Also, rents and the cost of real estate are not very tightly coupled, check out the "rent/price gap" some time.
Reality does not conform to your ideology.
http://neighborhoods.chicago.il.us Photographs of Life in the Neighborhoods of Chicago
http://hafd.org/~jordanb/ Pretentious Weblog.
I can't comment on many of the metros you site, but as for Chicagoland, the prices are effected heavily by perception and location.
There is actually many many under-utilized and empty or cheap housing options in Chicagoland.
Generally, in the suburbs, the cost driver is the quality of the schools and the precieved potential for easy, profitable resale in the short term. I live in one first ring suburb with a very good public school which drives property value, but also requires very high property taxes. Now I could cross one street and be either in a middle road first rin suburb with less-well performing schools, but get to pay 1/3 less in prop.taxes and $100,000 less in prop. cost.
Also, you could buy a house in parts of Chicago for $50,000 and in other places the same house would be $600,000.
Basically, a household's personal requirements (schools or not, level of percieved safety, accessibility, etc.) has a great effect on whether housing is "affordable" or not.
I also agree with jordanb.
I'm sorry. Is my bias showing?
dang! I don't care what neighborhood it's in, that's cheap! I seriously don't think you could find any house anywhere for that price in Richmond. I read that empty shells in a bad/transitional neighborhood were selling for $100,000!
Yes you do! $50,000 homes are typically not in the best of areas, your neighbors will not exactly be quiet ones, there will be theft problems, insurance will be very high in comparison to other areas, and your proximity to transit or freeways would be poor.
$50,000 does not buy you much in the midwest, but it will buy you a bare bones home or a one room condo in some areas.
We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805
I meant that you can't buy a house for as low as $50,000, even in the worst neighborhoods, not that I don't care about living in dangerous neighborhoods. Like I said, a shell in a scary 'transitional' neighborhood goes for $100,000+ 'round here.
We don't any any efficiency condos, but a one bedroom condo would go for $80,000 plus.
Median Housing Price in the county I work for has gone up $118,000 in just four years to $287,334 (2000-2004). I think it's really wrong when the increase here is more than a starter home in TN or MO
Last edited by Tide; 14 Mar 2006 at 12:43 PM.
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MEdian home price in Richmond is probably at $240,00 now.
I think you would hard pressed to find anything for $50,000.00 in St. Louis. Not even a bare bones condo...perhaps with no windows, doors and bullet holes all over, but nothing you could actually live in...
Idon't think there is anything in the SLC area that is under 50,000, not even small studio type condo's. In my zip code, the average selling price is $279,000, up from 154,000 5 years ago. There is a 1300 square foot home two blocks from that is on the market for 369k. Outrageous, although it certainly does increase my ability to sell my home and purchase one outright in a still decent but less desireable location.
Isn't it all about location-location-location??? Of course if you're in an area that's near retail, jobs, good schools, and transportation infrastructure in a world-class large metropolitan area with all amenities, housing prices are going to be through the roof. The demand is high because so many people want to live in or close to a metro area like NY, DC, LA, SF, Chicago, Miami, or Boston. We are, after all, in the age of the megaopolis. If your city doesn't have a baseball team, major concert events, 30 fourtune 1000 companies, tourism, skyscrapers, and world-class quality, it doesn't matter. And that's not necessarily what I think, it's just the truth.
Additionally people in these areas are selling their homes all the time,moving within the metro, and constantly making improvements to their houses as they go along, driving up the cost. Furthermore, as sprawl engulfs everything in these areas and places mature and economic improvement continues, everything suddenly becomes a "good location" and prices further skyrocket.
Likewise, in old manufacturing cities like Peoria, South Bend, and Cedar Rapids, where there's not much action and not much improvement, house prices are still going to average around $100K, sometimes lower. Why? Because there's a lack in jobs and culture and because generally people who live here stay in one location longer in these areas, settling somewhere and staying there because frankly there's no need to move within the city...everything's 15 minutes away no matter what.
"Life's a journey, not a destination"
-Steven Tyler
Check realtor.com... there are about a dozen sub-$50,000 houses listed in Richmond. I think they're mostly around the East End (upper Church Hill-ish? I don't know my Richmond neighborhoods that well). They look like horrible houses, but they do exist. If you know a realtor with MLS access I'm sure there are a lot more on the market that aren't on realtor.com...
There are a couple zip codes in Philly where the median home price is 30-50k. They're not very nice neighborhoods.
2005 median sale price by zip, from Philadelphia Magazine
You're treading on pretty thin ground here, you're comparing facts (employment) with judgement calls (culture). Just a kind word to the budding planner.
I do like your '...everything is 15 minutes away' analogy though, interesting observation, though I don't know if thats truthful or not.
We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805
Sure, everyone has their own opinions regarding culture, but the bigger cities usually have everything the smaller ones have, and then some. And you can always make a day trip to the smaller cities or whatnot...I do it all the time. Small cities are cool places, but not necessarily good to live in...mainly due to the jobs thing, among others.
"Life's a journey, not a destination"
-Steven Tyler
Try taking a trip to Auburn Indiana; Kalamazoo, MI; or Kohler, WI. They all have things you cannot find in places like Chicago or Detroit. A shining example is Toledo (medium sized city) which has a phenomenal art museum, zoos, a metropark system, symphony, opera, lakefront state parks, and a culture based upon glass and jeep manufacturing.
We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805
Sadly, though, many of these places have this cultural infrastructure in place because of past glory days. With the over-centralization of everything into fewer and fewer (and more and more distant) hands, this is less likely to be true. As Bear has described, Toledo has lost most of its headquarters. My home town (Fort Wayne, Indiana, which also has many of the cultural amenities you list) is more and more a branch plant town (with the branch plants closing as we continue our headong rush into insolvency). Auburn was home to a long-gone early auto industry. Now it's another county seat small town with a few branch plants (some closed or closing) and commuters to Fort Wayne.
Perhaps the o/p's original point, that the large coastal cities are becoming unaffordable for all except the studio apartment -dwelling singles and the elite (In San Francisco, for example, apartments in the drug-ridden Tenderloin easily cost more than $1200/month), will lead to the revival of smaller cities. The lesser avilability of jobs may mean less to you if the 1964 1100 square foot ranch house costs $600,000 in the coastal metros.
But still, the statistics prove that a few attractions on a day trip aren't nearly enough to make people want to be permanent residents of that area. Believe me, I love Rockford, Springfield, Cedar Rapids, and Manitowoc, but I choose to stay in Chicagoland because I know my chances (and choices) of getting a job (and much higher-paid) and access to all the cultural amenities of the big city (with only an hour or two drive to the small cities) is greatest.
"Life's a journey, not a destination"
-Steven Tyler
Jobs in big cities pay more, sure. But often the additional cost of living cancels that out and you'd actually have more discretionable income in the smaller city, plus live in a nicer house.
I think the reason that prices in Kansas City are so flat is because there are more builders than buyers, and there are no geographic or political features that prevent development or artificially raise prices.
Median home price in the Kansas City metro is $159,000 and increasing by a relatively low 4.4%. You can get a nice 1000-1500 sq. ft. condo downtown for that price, or a 2,500 sq. foot condo in single family home in the suburbs for that price. Home prices were a major determining factor for me in deciding to move to KC from Pennsylvania after college.
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