By way of Edward Glaeser’s post (via ScienceBlogling Jonah) about the relative stability of housing prices in the New York City area, I was looking at the S&P/Case-Shiller Seasonally Adjusted Home Price Values (I really need new hobbies…). The really odd thing I noticed is that in the metro areas that had huge crashes (greater than twenty percent of the maximal value), there was a huge spike in home prices from 2005-2006 (and which sometimes started in mid-2004), while, in metro areas that haven’t crashed, there was no 2005-2006 spike. So what the hell happened in 2005?
Consider Boston and Denver. Neither metro area had this huge 2005-2006 surge: the maximum increase from 2003 to 2006 was ten percent for both areas with lots of fluctuations, which matches my anecdotal observations. On the other hand, the DC metro area roared ahead in 2005-2006, and then plunged twenty five percent from the high (which also correlates with personal observation). In Miami, the index dropped 39 percent from the 2006 high to its current value. San Francisco seems to be a rare intermediate case; I don’t know what to make of that.
So what the hell happened? It can’t be land scarcity, since Boston wasn’t affected* (and, if it were, why would this suddenly become a problem in late 2004 and 2005?). Does this have something to do with regional and state lending practices? (I’ve been looking and couldn’t find it–and I could be imagining this–but I remember a Boston Globe article that described how Massachusetts had a far less risky housing loan problem than other states). Or are housing markets are still driven by local phenomena, but Big Shitpile is so big that it is crushing local bubbles?
*Once you discount the area of Boston that is covered with water (and obviously uninhabitable), the city of Boston has one of the highest population densities in the U.S.