High priced housing was predicted to happen in Oregon over 40 years ago. This wasn't a guess, it was a mathematical and economical certainty. Only the timing was unknown. So, here we are, at last, and we are not alone.
Why housing is so expensive:
- In-migration increases demand faster than supply can accommodate.
- Housing shortage following the Great Recession creating tight credit and few buyers.
- Apartment-to-condo conversions took a large supply of existing, affordable apartments out of the market during the housing bubble.
- Demographics Two of the world's largest generational cohorts are in the housing market at the same time. This adds the demand and puts another strain on supply.
- Land containment regulations. If cities are not allowed to expand, the result is expensive, scarce land to build on, which in turn demands an expensive house with smaller lot.
- A good economy gives people more money to spend on housing and adds to in-migration.
- Gentrification - usually follows government-initiated and publically funded urban renewal which provides the impetus for improvements that raise property values.
- Sub markets' prices rise faster and higher because they are more desirable.
The main reason housing is so expensive is:
Proof that cities with land containment policies (urban growth boundaries) have more expensive houses can be seen in the graph below. Article provides insights about how and why cities and states use their regulatory authority to manipulate prices of land, and consequently the housing and construction market. Is it any wonder that the construction industry and labor unions lobby state and local officials and contribute heavily to their campaigns? Politicians are in powerful positions ro choose who wins and who loses in high stakes real estate games.
When an activist group identifies a cause, the special interests and governments go looking for an outside party to blame rather than look inward at their own practices for a cause and solution. Besides, the UGB is seen as an environmental necessity. It isn't, but that's another story. Government leaders won't change popular policies no matter how stupid or damaging they are. The more government tries to "help" us, the bigger the regulatory morass they create.
The article below presents a very strong, fact-based argument. If you don't agree with the author's reasoning, why not? Is yours a logical argument that can be proofed? Did you research your facts?
Why the Great Divide Is Growing Between Affordable and Expensive U.S. CitiesWall Street Journal, By Laura Kusisto, April 18, 2014
Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming more and more expensive.
As a whole, U.S. cities are expanding as rapidly as they have throughout the last half-century. From the 1950s until the 2000s they have added about 10,000 square miles per decade, or an area roughly the size of Massachusetts, according to research by Issi Romem, chief economist at real-estate site BuildZoom, to be released Monday. But beneath the surface a divide is deepening.
On the one side are cities such as San Francisco, Boston, New York and Miami that have slowed their pace of expansion dramatically since the 1970s, in part as they have added layer upon layer of building regulations. On the other side are cities concentrated in the southeast and Texas, which have grown outward and seen much slower price growth.
The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.
The developed residential area in Raleigh, N.C., grew by 219% in the same period, while home values grew by 27%. In Seattle, the developed area grew by 69%, while home values grew by 119%.
Mr. Romem draws the distinction succinctly: expansive cities versus expensive cities.
“If you don’t let the city grow, you’re going to get prices going upward…and see the middle class being pushed out,” Mr. Romem said.
Mr. Romem’s research reads on its face like an argument for suburban sprawl, which has come under fire both for its environmental consequences and tendency to lead to oversupply that can lead home prices to crash.
Mr. Romem said ideally cities would relax regulations and build upward rather than outward. But, he said, promoting development on empty fields is more politically feasible than building apartment towers in single-family neighborhoods, and thus likely to ease affordability pressures more quickly.