Brad DeLong comments on the housing bubble article I’d mentioned a few days ago.
Given the restrictions on supply–the unwillingness of San Francisco or Cambridge neighborhoods to look more like the Upper West Side or Newbury Street, the unwillingness of Berkeley and Lexington neighborhoods to look more like San Francisco or Cambridge, et cetera–the only evidence that’s convincing is the price/rental ratio. And even there the price/rental ratio ought to respond to interest rate changes by an amount proportional to the duration of housing as an asset…
Interesting that he mentions greater Boston neighborhoods by name, because today, as the Herald reports, Northeastern’s Center for Urban and Regional Policy has released its annual housing survey, which shows a substantial decrease in the city’s rents.
Source: Greater Boston Housing Report Card 2003
Essentially drastic declines in the toniest and most inflated neighborhoods (Back Bay, South End) have combined with a tapering off of rent-differential adjustment in JP, Hyde Park, or Dorchester (View click here for neighborhood breakdown).
Meanwhile, housing prices have been going up unabated. From the MA Realtor’s Association, here are the trends in condo prices alone:
Region 2002 2003 Change
Cape Cod $192,654 $231,684 +20.3 %
Central $157,815 $184,109 +16.7 %
Greater Boston $322,387 $341,408 + 5.9 %
Northeast $201,630 $224,950 +11.6 %
Southeast $124,286 $156,693 +26.1 %
South Shore $204,005 $232,103 +13.8 %
West $123,439 $129,633 + 5.0 %
STATEWIDE $243,951 $267,269 + 9.6 %
I’ll try to reflect more on this discrepancy in a (near)future post. For now, let’s just note that the figures seem to point to a bubble, not simply to local constraints on housing supply.
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