Verbatim: “Why is housing in some cities still booming?”

Real Estate: Last of the red-hot markets

Why is housing in some cities still booming? The answers may help you navigate your own market.

For the most part, the iron laws of supply and demand explain what’s going on…

The basics haven’t changed. Job growth and rising incomes boost demand for, and prices of, housing…

If it’s not demand pushing prices up, it’s got to be you-know-what…[supply]

A trio of economists, Joe Gyourko, Christopher Mayer and Todd Sinai, have argued that persistent growth in cities they dub “superstars” (for example, New York City and San Francisco) is fueled by a limited supply of housing and by a concentration of high-income families who are willing to pay top dollar to live there.

True, both cities have hit bumps in the road in the past, and prices over the past year in the New York metro area rose by only 2.7% while in San Francisco they sank by about 1%. But, Gyourko says, “over the long term they will outstrip the national average.”

Thank you “Craig”.  Thank you readers.  Thank you commenters.  Thank you CNN Money.  Have a good weekend.

-Real Estate: Last of the red-hot markets

Why is housing in some cities still booming? The answers may help you navigate your own market. [CNN Money.com]

7 thoughts on “Verbatim: “Why is housing in some cities still booming?”

  1. Let’s not get too excited about the super city theory:

    http://online.wsj.com/article/SB119638554201808816.html?mod=hps_us_inside_today

    They’ll Take Manhattan — For Less

    No Longer Immune, Sales and Prices Slip; Waiting for Bonus Time

    By BEN CASSELMAN

    November 30, 2007; Page W1

    Even as the national housing market has been hit by slow sales and falling prices, Manhattan has continued to shine. But now its light may be dimming.

    Fewer apartments are being sold — 858 went into contract in September, a 9.9% drop from a year ago and the lowest total in two years, according to brokerage Corcoran Group — and the inventory of unsold apartments is increasing. Prices are also leveling off. The median price of a Manhattan apartment fell 3.4% in the third quarter from the previous one, according to the research firm Radar Logic. The firm says properties are sitting on the market longer, too, an average of 123 days, up from 94 days at the peak of the market in 2005….

    I personally think that “super cities” will hold up better, for all the obvious reasons. But there’s another factor beyond supply and demand FOR HOUSES and that’s supply and demand OF CREDIT. (caps for emphasis, not yelling…)

    The credit crunch is what clobbered volume across the board in Q3. Credit availability (and expense) can be a heavy hammer to house demand, independent of supply. If money is more expensive, demand will shift down AND/OR prices will shift down to accommodate.

  2. As for SF specifically, my best guess is that we’re headed for multiple years of stagnant prices. As an owner, I’d be ok with that scenario. A 10% drop across the board is not inconceivable but in the long run we won’t fall apart like the burbs are doing now.

    If you want to buy now, try to buy for the long term. I don’t think it’s a good strategy to buy a place with the intent of moving up in a few years. Too much volatility. Just buy as much as you can reasonably afford and (IMO) use conservative, fixed rate financing and you’ll be fine.

  3. Is SF down 1% as the article says? B/c, from the 40 or so examples I see here in District 7 and District 8, prices are up AT LEAST 5% if not closer to 10% this year, and that’s with the credit mess.

    I don’t mind slowing prices either with my locked loan. I eventually want to move up to a house that costs $1 or $2 million more. Hence, I’d like some catch up time too :)

  4. Dave, I think your comment is right on. That is pretty much the very advice that I consistently give to my friends who are looking.

  5. I live in D 7 and I have noticed that most of the properties sell quickly. But then again a lot of the properties out here are still being held, improved, and occupied by multiple generations so that might account for the low supply.

  6. I think prices are going to go up another 5% in 2008 in SF and the Tahoe market is going to stabilize, after falling about 10% from 2006.

    I for one am excited to get my bonus next month, and plan on buying property in the city if there are any deals.

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