Comments on: Housing and the Crisis, Part III

By: ohwilleke

ohwilleke — Tue, 28 Jul 2009 23:32:53 +0000

There is a fit, but it isn’t too strong. Aside from outlier Honolulu (probably driven by large percentages of non-resident property ownership that plays with the income side of the relationship) and New York (where the slow phase out of rent control is an important factor), the vast majority of the cases fit in something closer to a band than a simple single variable correlation.

Also, financial centers New York and San Francisco has taken a major per capita income hit and seen corresponding collapses in real estate prices, between 2007 and 2009.

Eyeballing the data, the location of a data point in the band is pretty much a function of whether an area’s economy is growing (above the line), stable, or declining (below the line), relative to the nation as a whole.

I’ve seen multiple housing value statistics for Detroit (which are dreadfully low — Detroit proper’s median housing value is $6,000 and the metro area median housing value is $50,000), and the metro area per capita income is about $38,100 (per wikipedia), which would probably corroborate the location in the band to economic growth (decline) corrolation, a point in the general vicinity of the dot for Akron on the scatterplot, but perhaps a little further from the regression line.

By: | Globizen Property

| Globizen Property — Tue, 28 Jul 2009 17:39:13 +0000

[...] Richard Florida and the Creative Class Group have an interesting series of studies on housing and the crisis in the United States. The latest examines house prices vs. income levels for various American cities. [...]

By: Brandon

Brandon — Tue, 28 Jul 2009 16:44:58 +0000

Interesting series of studies.

While there is obviously a strong correlation between house prices and income levels, I’d be curious to see foreign investment levels overlaid with this study. Honolulu, for example, sees a lot of interest from Asian buyers.

To me, this seems like the one variable that’s so difficult to really understand. Sure you can look at the income levels within a particular city, but how do you know if there is a bubble? What is the appropriate price point for Honolulu? Foreign buyers can make such a difference.