As we’ve established and you already knew deep in your bones, the same house will be more expensive in Greenwich, CT, than in Fargo, ND. What you may not have known, though, is that the difference in price is not merely reflective of the difference of costs, specifically land and material costs in CT vs ND. There’s an X factor too, or, as the experts call it, a “shadow price,” that makes San Francisco so absurdly unaffordable it might as well be Mars.
The price of a house or apartment, the authors argued, is more than just the value of the land plus the value of the building. There’s a third, shadow price, which represents how difficult it is to get something built given local regulations. In highly restrictive places like San Francisco, regulations impede the supply of new buildings, and so raise the price of housing.
So, like, for example, materials and land cost 2x the national average in SF, and yet a house costs 3.6x the national average. The difference can be attributed to regulations. You know, bureaucracy, red tape, all that nonsense. The Economist flatly states, “the [Bay Area] is one of the most difficult places to build in the country. Prices are therefore soaring and neighbourhoods are changing, touching off some occasionally nasty social conflicts.”
DC apartments, though nutsy, remain more reasonable than SF’s, in part because, after our nation’s capital went through crisis after crisis between 1969 and 2001, it decided to get back on its feet by investing in tons of new housing — for DINKs. If you build it, DC figured, they will come, “they” being single, sexy, spendy types, which represent more short-term gain for an urban area. And lo, the city was right.
Guess what, America! Grab your bags; we’re moving inland. At least we are according to this hilarious NYT trend piece about the country’s fastest growing, affordable, non-coastal cities:
But of those who moved more than 500 miles, the share who said they were chiefly motivated by housing has risen to 18 percent in 2014, from 8 percent in 2007, the earliest year such data is available, according to the Census Bureau. The desire for a new, better or cheaper home and the opportunity to buy instead of rent were among the housing-related reasons people cited. … “A large percentage of Americans had to read ‘The Grapes of Wrath,’ ” said Mayor Mick Cornett of Oklahoma City, referring to the John Steinbeck novel that chronicled the flight of Oklahomans to California in search of a better life during the Depression. Now the grandchildren and great-grandchildren of those migrants are returning for the same reason. “It’s ‘The Wrath of Grapes,’ ” he said.
Ha! I’d move to Oklahoma City just to hang out with that guy.
The best thing ever is when the Gray Lady goes slumming and, for her weekly Great Homes and Destinations round-up, looks at houses for less than $1,000,000. You can tell she’s trying to care about the lives of (relative) Normals and their six-figure real estate, really she is, but her heart just isn’t it. Observe: “The kitchen is a long, narrow room with stainless-steel appliances, rustic wooden cabinets and a high ceiling. Off the kitchen, there is a den.”
After that, there’s only the sound of muffled sobs.
We can do better than that! Herewith, Good Enough Homes & Destinations: What You Get For $539,000. And we’ll focus in on some of those Mid-Sized Cities you all were raving about.