The diverging US Housing Industry


Conditions Are Ripe for a Big-City Exodus

So What If New York Is Unaffordable? That Helps the U.S.

Rich City, Poor City: How Housing Supply Drives Regional Economic Inequality




In late 1990s, despite dotcom bubble that eventually crashed back to earth, from a money flows standpoint, the bigger imbalance was that high valuations of large-cap stocks relative to small-cap stocks

The U.S. housing market is similarly positioned today as it is growing more unequal.



The pack of most expensive markets is diverging from the rest.
– The priciest metros were 144% more expensive than the least expensive metros in 1986 but that differential has grown to over 319%.


– What’s more, expensive markets almost always had bigger price gains -> the housing rich are getting richer while the housing poor are getting poorer.


The economic fortunes of homeowners who bought in the 1980’s have been tied closely to the random fortunes of U.S. geography [1]. But long lived the West Coast, Northeast, greater Washington, D.C., and Denver.

Even Techies Can’t Afford San Francisco Anymore


The 30-year change in home value across the largest 100 metros is strongly correlated with

1. income growth


2. the amount of housing construction relative to demand


supply elasticity is strongly correlated with house price appreciation
– a lack of housing construction in many metros induced home price appreciation. [3]


A.  Just buy homes in the most expensive metros !!!

B. Since the priciest metros continue to diverge from others, these geographic disparities are sure to persist into the near future. [2]



But there are also good things:

 a wealth transfer from the most desirable communities to the upwardly mobile ones
– The tens of thousands of people who leave New York and California every year act as sources of new demand in the places to which they move, like Florida, Texas and Colorado, where job migration is the driving force of the economy


— Some economists argue that this migration from high-cost to low-cost cities acts as a drag on productivity and national output, because less dense cities are less productive than more dense cities.

+++ 1 This theory is running up against a new reality, however. If you think of wages as a proxy for productivity, the numbers back this up: San Francisco tech workers have less and less of a salary advantage over tech workers in other cities.

+++ 2 Even if the productivity argument holds, there are economic equality and civil rights benefits to migration from coastal metros to less-developed ones. [3]

Therefore, Density limits in leading cities fuel the economies of rising cities like Atlanta  
– > thus decrease economic inequality between metro areas and lead to economic interdependence that drives civil rights




Valuations converging of large-cap stock and small-cap stocks will be replicated in the housing market. Reason:

1. There’s a limit to everything. Substitution dynamics — consumers weighing the value of various goods — applies to housing just as much as it does to food.

2. internet will lead people and jobs leave primary metro areas for secondary ones [4]




There is wide regional variation in the amount of wealth generated from homeownership. Homeowners’ return on investment in Rochester, N.Y., and Wichita, Kans., have been +85% and +89.9%, respectively, while the return in San Francisco and San Jose has been +557.6% and +496.5%


These findings are meaningful, since wealth is often passed down to future generations, who in turn might use such inheritance to also purchase homes, which continues the cycle of wealth accumulation. See Family Tradition: Kids Are More Likely to Own a Home If Their Parents Did


スクリーンショット 2016-09-03 19.32.01スクリーンショット 2016-09-03 19.32.11スクリーンショット 2016-09-03 19.32.23

Despite a need for more housing, and despite the labor shortage and the wage growth, construction industry employment fell 6,000 in April and 16,000 in May and showed no growth in June. This is the first time in more than five years that construction employment has shown no growth for three months.

While the signals from the economic data are very strong, the market signals have been more muted. What’s clear is that 2-3 percent construction wage growth and 5-6 percent house price appreciation isn’t anywhere close to creating strong enough price signals to encourage the market to build all the housing we’re going to need over the next decade.


Job convergence between metros “spreads the wealth,” ensuring that tech workers in Raleigh and Atlanta and manufacturing workers in South Carolina and Alabama have access to good jobs too.

Over the past 50 years, Southern communities with more-developed business interests have made progress on civil rights before those with less interdependence with the national economy.One of the reasons Atlanta made more progress on civil rights in the 1960s than Birmingham was the local business community was afraid of losing access to Northern capital.Similarly, when “religious freedom” bills and other measures seen as anti-gay arose in Indiana, North Carolina and Georgia, national business interests like Apple and Pfizer (not to mention Nascar) pressured politicians to stand by gay rights. Donald Trump’s shrinking electoral map is in part due to the spread of well-educated professionals to Virginia, Colorado and North Carolina.


The conventional wisdom that the internet would allow people and jobs to leave primary metro areas for secondary ones has run up against the fact that over the past 20 years. BcauseThis at the height of the last housing boom the impact of the internet on daily lives was still quite small

Now, with a labor market approaching full employment and the housing market nearing a normal recovery, it would be fair to evaluate the question of whether people will move.

The latest Case-Shiller home price report shows that Portland and Seattle have the fastest home price growth in the country, benefiting from Bay Area transplants.Additionally, Sun Belt metros such asDallas, Tampa and Miami now have faster home price growth than San Francisco or Los Angeles.

The history of the last transformative technology the automobile, offers another counterargument. The Model T Ford was produced between 1908 and 1927. Yet the Interstate Highway System was not approved by Congress until almost 30 years later, and the Sun Belt boom occurred even after that. The automobile was a revolutionary technology incubated in Detroit, but its biggest beneficiaries were the suburbs in Atlanta, Houston, Dallas and the Southwest.






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