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March 02, 2007
The Exurbs of New York, L.A., and Miami
You may have heard that prices are holding up pretty well in New York City, L.A., and Miami. That's true for the cities themselves (leaving aside Miami's overbuilt condo market). But things aren't so great in the exurbs--those outer suburbs where people tend to move in search of affordable housing.
During the boom in housing, prices rose at the same rapid clip in the cities, the suburbs, and the exurbs of the three metro areas, according to an analysis by economist Andrew Leventis of the Office of Federal Housing Enterprise Oversight. But since then, the exurbs have barely gone up in price, while the cities themselves are still showing healthy appreciation, he says.
Why? Hard to say. The exurbs are doing about as well as the center cities in other big metro areas, Leventis notes. New York, L.A., and Miami differ from the others in that they are expensive (as measured by price-to-income ratios) and have costly exurbs (as measured by the cost of exurban housing in relation to city housing).
But Leventis admits that he doesn't have a fully developed theory for the differences. "It?? merely an association right now. It?? not something we can fully explain."
Read his analysis starting on page 8 of the report here.
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What may be happening is that the ex-burb housing prices and costs of supporting ex-burb lifestyle had risen to a point that total ex-burb costs are not so different from central city (include monetizing the costs of automobiles, hedonic costs in commuting, etc). The "spread" between city and ex-burb is more narrow than before. The likely follow is that the price/cost trend will widen out at the expense of the ex-burb.
Posted by: fritz at March 2, 2007 12:22 PM
I have been watching the housing bubble for awhile and have come to the conclusion that it's a lot worse in some places. For example, if you search for "Housing Bubble" at Google Trends http://www.google.com/trends you will see that on a per capita basis, nine of the top ten search emanation points are in California.
Anyway, I have been posting this side of the story on the Housing Bubble Blog and my posts have been disappearing. They'll often make it there, but then after a couple hours are gone. I've seen other similar posts come and go too.
I have come to the conclusion that such posts violate the groupthink over there and are being censored. In fact, if you say anything that at all challenges the party line, you are immediately branded a "Troll". The whole thing comes across as quite cultish.
So next time you are looking at a blog and thinking how wonderful open communication on the Internet is, just know that the Thought Police are patrolling.
If you don't believe me, give this a shot yourself on said blog:
Posted by: Drentzel at March 4, 2007 08:58 PM
Exurban housing isn't difficult to understand. It will fall, in California anyways, because of clogged up freeways, clogged up arteries, and job losses. Freeways clogged with paycheck to paycheck commuters stretched to the breaking point by rising mortgage and gasoline costs will walk away from 100% down loans. The houses will fill with people collecting disability, as their checks go farther, farther from job centers, and aliens willing to cram 200 into a room.
Posted by: Steve Wimer at March 5, 2007 01:03 PM
Your link to Leventis' analysis (Read his analysis here.) leads to the OFHEO report instead.
Posted by: Steve L. at March 5, 2007 05:07 PM
I've a great pleasure to read the web. It make me widen my business English Knowledge.
Posted by: quangngocluyen at March 5, 2007 08:38 PM
I just updated the item to note that the analysis begins on page 8 of the OFHEO report.
Posted by: Peter Coy at March 6, 2007 11:11 AM
Dear Mr. Coy:
You hit the nail right on the head!
Posted by: Tom Au at March 7, 2007 09:34 AM
Appreciation is driven by congestion. The exburbs have plenty of land available to develop, therefore have no reason to appreciate other than temporary imbalances in demand and supply. There is little opportunity for construction in urban areas so what appreciates is the value of the land, not the structure, while exburbs have expanded to satisfy demand. Commuting costs, especially gas costs, have also made them uneconomic as bedroom communities.
Posted by: Lord at March 8, 2007 04:26 PM
It's simple. There is more to a homes' value than square footage and lot size. In Miami the ex-burbs may be relatively close to the downtown core, but traffic problems and the lack of any public transportation effectively cut those residents off from the city. If you live in Kendall or Pembroke Pines you don't live in Miami. You might as well be living in Central Florida. The high paying jobs in downtown and on Brickell, or in Coral Gables, are simply too far away from Miami's ex-burbs.
Posted by: Josh at March 9, 2007 02:03 PM