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TinotopiaLog → The Housing Market Keeps Lurching Along ( 8 Mar 2004)
Monday 08 March 2004

The Housing Market Keeps Lurching Along

Oh, sure, there’s nothing wrong with the housing market:

Louie Guimmule is among hundreds of people who want to buy into Chatham Square, Old Town Alexandria’s newest townhouse development, where prices start at $560,000 and reach $1.1 million. When he stopped by the construction site last Saturday, dozens of prospective buyers, sleeping bags in hand, were lined up — a full seven days before the developer was planning to accept contracts on the first, still-unbuilt units.

As the Post article observes, it’s not uncommon to see people camping out to get tickets to certain popular movies and concerts; but these people are generally either very young or are obsessive nerds; and besides, they’re not camping out to get tickets at all but to get particularly good tickets for the same price as less-good tickets. Here, though, we have relatively wealthy people waiting in line at a construction site for the opportunity to spend $500,000 to a million dollars to buy a house.

Usually, when you spend a million dollars to buy something — anything — you don’t have to camp out to do so. In the million-dollar range, there’s very few things where the demand exceeds the supply. Why is housing different? Why is it that people will not just line up but camp out on the sidewalk so they can line up for days in order to spend a million dollars on a house that they haven’t seen because it hasn’t been built yet?

The usual Libertarian response to complaints about suburban sprawl, bad urban planning, and the horrible traffic that those things generate, is to point out that people continue to buy houses in the middle of nowhere for ever-increasing prices, so the market is just supplying what people want. However, here we’re faced with the phenomenon of million-dollar townhouses in an area known for its bad traffic.

The Washington area has generally high real-estate values, but for a million dollars you can find something quite nice. In Great Falls, VA, one of the highest-buck areas in the Washington suburbs, at the moment there’s an 18-year-old house for sale for $959,000 with two acres of wooded land, a big swimming pool, a two-car garage, five bedrooms, 3.5 baths, etc., etc. You do not have to camp out to buy this house; you just need a million dollars. Yet people are willing to pay that much (and more) for much less house if it’s in the right location. The ‘right location’ almost always means a very dense location.

Why is this? Do people only want to live in dense locations? Obviously not, or we wouldn’t have tract-house subdivisions sprawling all over the country. But that people are willing to pay a hefty premium — and camp out — for the opportunity to live in dense surroundings would seem to indicate that there’s significant unmet demand for the dense-housing product.

Posted by tino at 11:35 8.03.04
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