The New Yorker’s financial writer, James Surowiecki, has a really good piece in this week’s issue about the real estate market. The main questions he answers are, if there’s an oversupply of housing, how come the median sale price has not dropped, and is it true that home prices have not fallen for a full year since the depression?
People have been building bigger homes—the typical new home is about twenty-five per cent bigger than it was twenty years ago—and putting money into improvements like central air-conditioning, home theatres, and pools. And the impact of quality adjustments isn’t trivial; a study of home prices between 1977 and 2003 found that adjusting for quality reduced the return to homeowners by forty per cent. As for the much vaunted statistic about housing prices never falling for a full year since the Depression? That’s true only if you forget about inflation.
To read the whole article, click here.