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 The two Americas

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gastaoss



Number of posts : 440
Registration date : 2007-07-01

PostSubject: The two Americas   Sat Oct 20, 2007 10:08 pm



October 20, 2007, 4:38 pm


The two Americas







More than two years ago I argued that to appreciate the extent of the housing bubble you had to make a distinction between regions:
<blockquote>Many bubble deniers point to average prices for the
country as a whole, which look worrisome but not totally crazy. When it
comes to housing, however, the United States is really two countries,
Flatland and the Zoned Zone.
In Flatland, which occupies the middle of the country, it’s easy to
build houses. When the demand for houses rises, Flatland metropolitan
areas, which don’t really have traditional downtowns, just sprawl some
more. As a result, housing prices are basically determined by the cost
of construction. In Flatland, a housing bubble can’t even get started.
But in the Zoned Zone, which lies along the coasts, a combination of
high population density and land-use restrictions - hence “zoned” -
makes it hard to build new houses. So when people become willing to
spend more on houses, say because of a fall in mortgage rates, some
houses get built, but the prices of existing houses also go up. And if
people think that prices will continue to rise, they become willing to
spend even more, driving prices still higher, and so on. In other
words, the Zoned Zone is prone to housing bubbles.
And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.
</blockquote>
Now the bubble is deflating — and here’s the map.
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