tag:blogger.com,1999:blog-1110014885778996459.post1641952620775485589..comments2024-03-28T04:16:11.729-07:00Comments on Idiosyncratic Whisk: You weren't wrong, Adam OzimekKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1110014885778996459.post-17499738644872232502016-01-25T13:05:50.148-07:002016-01-25T13:05:50.148-07:00I think you're right about population growth. ...I think you're right about population growth. I posted a graph on that a few days ago that I had received from a reader. At shorter time scales, though, the data is probably a little messy on that.<br /><br />The issue with homebuilders is why I think the sharp drop in housing starts is an early sign of a negative demand shock. Why wouldn't builders drop prices in order to keep volumes up? Prices did drop in the cities, like Phoenix, that had a late run-up. But, in the other open cities, prices dipped a little bit, while starts collapsed as strongly as anywhere.<br /><br />If interest rates were artificially high (and I think issues that keep the yield curve from inverting fully kept even long term rates high), then the value of the lot with residential improvements on it falls below the value of the lot with less intensive alternative usage. So, regardless of the economics of the inventory they were sitting on, homebuilders in Texas would have been faced with costs on replacement lots that would have reduced their incentives for price concessions. Why unload a bunch of inventory that you have to replace with more expensive lots? That's a theory. I'm hoping to get more information on that issue.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-26211047164358401462016-01-25T12:50:35.885-07:002016-01-25T12:50:35.885-07:00I wonder if housing starts/population *growth* in ...I wonder if housing starts/population *growth* in addition to just population might be informative. Off the top of my head, I don't remember Phoenix having markedly higher growth rate than Texas's major cities, but maybe it did near the peak? For Las Vegas I think it definitely makes sense to consider growth rate; LV definitely would require a lot more building than probably any other city in the country of comparable size to keep pace with demand.<br /><br />There's also the question of how much builders try to preempt anticipated growth in demand: if it's 2004, and builders expect demand to grow as much in 2005 as it is in 2004, and they buy up land and build to account for expected growth, then the rates go up, quashing demand, effectively rendering that city retroactively 'overdeveloped', at least for the new post-rate-hike demand level. <br /><br />But I have no clue to what extent or how far in the future developers do indeed try to anticipate growth. But this might explain why some high growth cities might have experienced such a boom and bust in prices.Anonymoushttps://www.blogger.com/profile/07928458476301534836noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-71251282793382805882016-01-25T11:02:26.979-07:002016-01-25T11:02:26.979-07:00You are right. Phoenix - and also Florida, Nevada...You are right. Phoenix - and also Florida, Nevada, and inland California - are special cases. It does appear that there were price movements late in the boom in those areas that were not justifiable by reasonable long term rent expectations, given their longstanding openness to new building. So, I think these few areas are the one place where we might ascribe some sort of "demand-side" causality to home price increases.<br /><br />On the other hand, the extreme price movements in these areas tended to be in late 2004 and 2005, after Fed rate hikes had begun. That doesn't really fit some of the demand-side explanations. Can we blame loose money when the sharpest price increases were happening when the yield curve had flattened and the Fed Funds rate was hitting 4-5%?<br /><br />These are areas that are the main recipients of migration out of New England (Florida) and coastal California (inland Cal., AZ, and NV). And, there were clearly sharp supply constraints at the time. I hope to eventually get some qualitative answers. In Phoenix, at the time, builders simply couldn't get enough permits to meet demand. I believe that migration from California was the trigger here. According to the BEA, population flows into the Open Access cities was moving up during this period. I think this is the product of the migration pattern that develops when we have extended economic expansion. High income migration into the Closed Access cities keeps ratcheting up, creating more stress on local rents, and as local home prices went through the roof, lower income households moved out, to the secondary areas, creating a temporary spike in demand that local bureaucracies couldn't handle in the areas that were the main recipients.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-80998987257505079012016-01-25T01:19:55.857-07:002016-01-25T01:19:55.857-07:00Phoenix clearly appears to be an open access city ...Phoenix clearly appears to be an open access city from your graph of housing permits/population. But I happened upon this figure (or 'interactive graph' I guess) from the NY Times from 2014 (http://www.nytimes.com/interactive/2014/01/23/business/case-shiller-slider.html?_r=0). It shows housing price changes for some 20 cities between 2000 and 2014, and Phoenix appears to follow a pattern (during the housing crisis time period) more similar to cities like LA and SF than Dallas or Atlanta, in terms of the extent to which prices dropped after 2007.<br /><br />Is Phoenix an outlier then among open access cities in its relatively sharp rise and decline in housing prices? Something peculiar about Phonix that explains this, I wonder?<br /><br />Also, I'm curious, do you know where one would find (optimally, downloadable) tables with housing prices from various cities over time, and housing starts per year from various cities over time? I'd kind of like to do a linear regression of the decline in housing prices from 2007-2008 (or 2009) as a function of housing starts/population prior to 2007. Anonymoushttps://www.blogger.com/profile/07928458476301534836noreply@blogger.com