The Supply Side of Housing: God isn’t making any more land
Posted on December 9, 2007
Filed Under Builders, Selling Real Estate, Buying Real Estate, Real Estate |
Brent Hunsberger has an interview in this morning’s Oregonian business section with economist Keitaro Matsuda. He makes a point that we often overlook as to why Northwest home prices have held up while so many places around the country have not. Yes, more people moving into the region than out due to a relatively strong economy, but as well:
Basically, the supply-side constraint is significant in the general West Coast market. It’s not very easy to add additional housing stock to the supply. Zoning in general is rather restrictive in the West. Portland has very forward-looking policies related to preventing sprawl.
In many other areas, even those with strong economies, builders saw accelerated price and demand and built accordingly. Because they have to plan at least a year in advance, when the glut was finally realized they were left with stagnant inventory and even more in the pipeline. (They’re still building in Phoenix.) Prices, naturally, have dropped.
We’re not completely immune. We’ve talked about overbuilt Happy Valley and the upcoming Buena Vista auction, a builder sitting on roughly a hundred finished but unsold homes in the area. Here’s the price curve:
The good news is this: as long as we recognize that God won’t be making any more land any time soon, and continue to steward our land-use accordingly, we’ll remain an area that attracts people.
We’ll never have the gaudy run-up of prices in places like Las Vegas, but we’ll avoid the consequences as well.
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