Home prices in San Francisco v. home prices in California:
Employment in San Francisco v. employment in California:
*San Francisco experienced a much smaller housing boom and bust than the rest of California, and even Boston. Similar to Boston, it also had a massive employment bust compared with the rest of California during the housing boom, and especially after the 2001 recession. Indeed, it could be that the flight of the information workers fired in the aftermath of the tech bust was a significant contributing factor to the California housing boom. Were it not for the tech bust, San Francisco might have had the same dynamic as Boston, where people were fleeing soaring rents and home prices, partly due to gentrification, partly due to speculation. California as a whole was experiencing an employment boom during the housing boom only slightly stronger than that of the rest of the country. But why was the Boston boom and bust much larger in the city than in the country, while the reverse was true for California? The answer lies in rent. From 2002 to 2006 real rents in San Francisco fell, while they rose firmly between 2002 and 2004 in Boston. They spiked in both cities in 2001. I presume this was due to the presence of speculators in Boston and their relative absence in San Francisco, but this is just a presumption, not a definite fact. Could the rent difference have been due to a positive supply shock? Partly. There was more homebuilding in San Francisco than in Boston between 1998 and 2004. But I still suspect speculators in Boston’s case. The main other plausible suggestion I can think of is massive housing destruction, which is implausible, to say the least.
Home prices in Miami v. home prices in Florida:
Employment in Miami v. employment in Florida:
*Miami experienced much less employment growth during the boom than the rest of Florida. It also experienced much greater housing price appreciation during and after the boom than the rest of Florida. Florida as a whole was experiencing an employment boom during the housing boom, as well as Miami (relative to the rest of the country, but not to the rest of Florida). Miami had soaring rents during the housing boom, suggesting the growing transformation of that city into, in Erdmann’s terms, a closed-access one, during the governorship of Jeb Bush. Indeed, from 2001 to 2003, Miami’s housing starts declined, while they rose strongly throughout the rest of Florida. Personal income grew strongly in both Miami and Florida during the housing boom, which certainly caused upward pressure on homebuilding, home prices and rents.
Home prices in Boston v. home prices in Maine:
Employment in Boston v. employment in Maine:
*Boston had a much larger housing boom and bust than Maine. Boston, a tech boom center, had an employment collapse during its housing boom (which peaked in 2004, when its employment bottomed out), more employment growth than Maine during its housing bust, and much more employment growth than Maine after the housing bust (though not much more than the rest of the country). This fleeing from higher housing prices in the city while not causing a bubble in the countryside is certainly a very interesting dynamic. It’s almost as if Boston experienced some sort of rapid accumulation of much of the housing stock by absentee speculators between 1998 and 2004, forcing much of the population to leave the city for greener pastures to avoid the horror of the skyrocketing rents. Boston did, indeed, experience skyrocketing real rents between 1996 and 2004, which have since flatlined, although it seems as though they have entered a new boom phase as of 2015. Whatever happened, speculators or not, it seems Boston c. 2004 was one of the most ultra-closed-access cities in the country. Unlike in Maine, where housing starts gently rose throughout the period 2001-2003, in Boston there was only a spike in homebuilding in late 2003-early 2004– something which may well have been responsible for the end of its rent hikes and housing price boom. As for income, while Boston’s per capita income did grow faster than that of the rest of the country between 1998 and 2000, when its home price appreciation relative to that of the rest of the country was most severe, it fell behind that of the rest of the country between 2000 and 2004, when home prices continued increasing faster than in the rest of the country, though at a slower pace, and real rents skyrocketed faster. This suggests that my suggestion of absentee speculators causing the 2000-2004 part of the rent and price boom is mostly correct, given the improbability of wealthy gentrifiers doing such a thing at that time. After 2004, when Boston’s housing price boom relative to the rest of the country ended and its construction boom began to yield fruit, Boston’s incomes started to rise faster than those in the rest of the country again.