Calculated Risk has an interesting post in the wake of today’s Case Shiller numbers, comparing current housing prices with different baselines. It’s a pretty strong reality check: While today’s headline is that February prices were up almost 10 percent over 2012, we’re only worked our way back to 2003 (un-adjusted) or 1999 (inflation-adjusted) housing prices otherwise. A quick glance at his charts shows the price peaking and settling like a rubber band snapping back into the baseline.
Of course, the Shiller of Case-Shiller, Prof. Robert of Yale, had been banging the drum for years about housing’s tendency to return to prices that keep pace with inflation and little better. Here’s a recent op-ed of his on exactly this point. It’s advice well worth taking….but I wonder how far it applies in the Boston metro.
For example, take a look at the last (and most intriguing) of Calculated Risk’s charts. This bar graph compares house prices in each of the 20 cities that make up the Case-Shiller index with prices in 2000. By the peak of the housing boom in 2005, Boston prices were 79 percent higher than they were in 2000. Right now, they’re up 53 percent – and that makes Boston one of the cities closest to returning to its boom-time highs. Devnver and Houston are much closer, practically back to their peaks already – but Denver and Houston have had much steader housing markets. At the most, they were up 38 percent and 25 percent over their 2000 prices, compared to Boston’s 79 percent.
Could Boston prices fail to obey the rubber-band principle? Can they get permanently and substantially more expensive? There’s an intriguing post on Forbes.com that suggests it may be possible, at least on the neighborhood level. As Adam Ozimek points out, sometimes neighborhoods do just get better: crime drops, amentities improve, incomes rise, and houses get – and stay – more expensive. That’s what happened in South Philly. Could it happen in Boston? Maybe I’ll be able to figure out if these cranes and jackhammers here in the Fort Point ever shut up….
