Huge Regional Price Shifts In Houses Over The Past 15 Years

Whenever I do “rent is too damn high” talks, I always get questions about the housing bubble. Like aren’t these high prices you’re talking about just a bubble issue? Or what do you mean San Diego is expensive, don’t you know we had a giant real estate crash?

The St Louis Federal Reserve Bank just published a great research survey on this subject that pulls together everything we know on this and the answer is basically “no.” House prices went up the most during the boom period in coastal areas, and house prices fell the most during the bust in the areas that had the biggest boom. But if you take a 15 year perspective, you can see huge price shifts net of the boom and bust that pointed in different directions in different places. Looking at the 19 Case-Shiller markets, you see that we’ve had double digit inflation-adjusted increases in house prices in the Washington, Los Angeles, New York, San Diego, Boston, San Francisco, Denver, Seattle, and Miami metro areas. Prices have falled a lot in Detroit, Las Vegas, Atlanta, and Cleveland. Portland, Tampa, Minneapolis, Phoenix, Chicago, and Charlotte have shown only modest changes.

This change has been large and rather sudden and it’s been easy to miss the signal for the boom and bust noise. Consequently, I think a lot of people don’t really understand it. Manhattan’s been more expensive than Kansas City for a long time, but there’s been a genuine generational shift in the cost of buying a home in the New York area—not just in Manhattan, not just in the cool part of Brooklyn, but systematically across the metropolitan area—that reflects a huge decline in the real incomes of newcomers and a huge transfer of wealth to people who bought real estate in the eighties or nineties.