this goes back to the "cost drives prices" argument. Rules may have added $200k to the price of building. Not to the price of the home. Market sets prices.
Oh, and FWIW, townhomes cost less than $200k per door to build.
"In 2000, there were 742,237 housing units available to 726,792 households, for an occupancy rate of 97.92%. In 2005, there were 792,682 housing units available to 747,157 households, dropping the occupancy rate to 94.26%, a level not seen since 1980. Whoa. It would appear that during the five years of most aggressive home price growth, home building has more than kept up with increased demand."
Your summary of Washington's housing prices made me realize that demand is not related exclusively to population. However your paper also says that increased demand may not account for recent price increases.
How does the theory that regulation is responsible for reducing demand mesh with the data that there are more dwelling units per household available today than in 2000 (although the ratio was slightly down over the period from 1960 to 2000).
Is it possible that supply is not directly measurable by counting the number of housing units? I can understand how "environment vs. sprawl, builders vs. planners, parks vs. high-rises, and (most divisively) state vs. local growth management" can affect creation of new supply, but shouldn't existing supply be mostly independent of those factors?
Is it possible that these regulatory processes somehow reduce market efficiency and as a result reduce effective supply?
My theory is that "short term" arbitrage opportunities created by falling interest rates (which increase demand and therefore prices) led to wide spread speculation. Speculation increased demand which further increased prices and fueled more speculation. This happened nationwide. In markets without land use regulation, developers were able to exploit speculator demand by building more houses. In time, we will find these markets to be overbuilt and prices will drop below historical means until the population growth catches back up to supply. In heavily regulated markets, speculator demand was not met by developers and prices rose more. If speculator demand drops off because of softening prices, we should see prices drop further as all speculator demand disappears. Prices in heavily regulated industries should drop back to historical levels once that occurs.
Does this sound like a reasonable hypothesis to you?
I read a fair amount of Mr. Eicher's study, and it's quite exhaustive. I wouldn't even begin to compare my back-of-the-napkin style calculations with his in-depth analysis. I do have some questions about the study though, which I address in today's post.
Comments
This discusses some of the references and rationale behind the paper: http://depts.washington.edu/teclass/landuse/
and
This is summary of the data with respect to the Seattle area: http://depts.washington.edu/teclass/landuse/Seattle.pdf
The full paper examining 250 major cities is here: http://depts.washington.edu/teclass/lan ... 020408.pdf
Oh, and FWIW, townhomes cost less than $200k per door to build.
---Lost me right there... What a dumb and baseless article.