Red and Blue Real Estate

Check out this chart over at Zillow.

Stan Humphries, Zillow's vice-president of data and analytics, explains:

According to Zillow’s Zindex (median Zestimate or the middle estimated home value), the Red states (pro-Bush) have substantially lower home values than do Blue states (pro-Kerry). Red states had a Zindex of $190,323 vs. a Zindex of $323,952 for the Blue states as of the first quarter of 2007. ...  In other words, while Red states were on the winning side of the election, the Blue states are on the winning side in terms of real estate values, and by a substantial amount. ... The correlation between the Zindex and Bush’s share of the popular vote is -58%, indicating that the two measures are fairly inversely related.

Comments

[Wendy]

If I read this correctly, however, the red states had a slightly higher appreciation in their properties' values.

I'm sure a conspiracy theorist could make something of that...

[Michael Wells]

This is interesting on several fronts.

A large part of the Bush vote was working class folks who feel left out of the creative economy (and they're right they are). They tend to live in places that aren't in the top 10 or 20 of the Creative Class Index, often not in cities at all, and people aren't moving to those states so property values aren't being driven up.

If you take out the Blue mega-states, California and New York, the blue median drops to $265,657 -- still higher, but closer to the red. (As in the last post and others, these may be driven by international buyers).

The first quarter of 2007 was a time of declining prices after a huge run-up in many creative/blue cities, so the quarterly appreciation may not be important. The same figures for the last 5 years would look significantly different.

[Christopher Richards]

Have you considered low house (not really home) prices could be a good thing?

Look at the state of the housing bubble in the UK. Parents can't get their children out of the house because their is nowhere for them to live. Many adults are force to live together in cramped conditions. Low house values could well indicate a high quality of living.

[Michael Wells]

Absolutely, lower housing prices could, would, be a good thing. Many people, especially young people and working class families are being priced out of cities like New York and San Francisco. And way too many people are spending more than they can afford on housing. My thought was that more people are moving to creative class regions and the influx is driving up prices. They're not moving to places with stagnant economies, in fact are moving away and driving prices down. And relevant to this post, creative class cities are mostly in blue states.

As you say, many adult children live with their parents because they can't afford to move out, in the US as well as UK. Part of the freedom of the 1950's and 60's was related to low home prices and cheap rent. I remember renting apartments in Manhattan on minimum wage jobs. In that context, low housing costs related to good quality of living. Unfortunately, in America today low house values often mean a faltering local economy and/or declining population.

In a decent society, affordable housing would be widely available. One of the shames of the last three decades has been the US government disinvestment in affordable housing. The HUD budget was decimated during the Reagan years and has never recovered. The lack of low income housing causes competition that spreads upward through society in higher housing prices, and downward in financial stress and homelessness.

[Tory]

Maybe Blue states tend to have more government controls on housing supply, driving up prices, and Red states are more free-market, allowing supply to meet demand and keep prices reasonable?

[Michael Wells]

Maybe in some cases but not most. This has been a big debate in Oregon and all of the studies show that planning has less effect on prices than in-migration. In rural parts of Oregon where people aren't moving, prices aren't going up. Metro Portland has boomed and is projected to grow by a million in the next 3 decades and demand will drive prices up regardless of regulation. In fact, States are a clumsy measure, housing prices are much more city specific.

In the big empty Red states like N&S Dakota and Wyoming, and the ones that people are leaving like the farming and rustbelt Midwest, prices aren't affected by zoning because there's no demand.

Geography is probably a bigger factor. San Francisco and New York are totally built out, so more high income people moving there drives up prices. Regulations have little effect. Phoenix, Las Vegas and Dallas can sprawl forever, so prices stay comparably low on the suburban fringes, which affects the median, even though downtown condos can be in the millions.

[Tory]

In theory, the *metros* of Portland, SF, and NYC could sprawl forever (obviously the cities are locked) - and keep prices in check - but land-use regs keep that from happening, driving up prices. I agree the Portland is growing quickly, but Dallas and Houston are growing 3 times as fast (a million a decade each), yet housing prices aren't moving much because supply is allowed to keep up with demand.

[Michael Wells]

OK, Texas may be cheap housing, but I don't think you can make a strong case that land-use regs are driving up price elsewhere. If you look at the next post and the Case Shiller chart, the fastest rising house prices are a mix of Blue & Red State cities. The order is Miami, Los Angeles, Washington DC, San Diego, Las Vegas, Tampa, Phoenix, New York, San Francisco, Seattle, Portland, Boston, Minneapolis, Chicago, Denver, Atlanta, Charlotte, Dallas, Cleveland, Detroit.

California may be a blue state, but LA is the nation's poster child for sprawl and it's very expensive.

In theory maybe SF and NYC could go on forever, but in fact they both sprawl out for dozens or hundreds of miles already. The SF Bay Area has covered almost everything between the ocean and the Coast Range, jumped the mountains and is sprawling through the San Joaquin Valley and driving up prices there.

Metro NYC likewise has spilled many miles into three (blue) states.

Portland admittedly has Oregon's urban growth boundary (by the way, passed by the farm bureau to protect farmland, not by urban planners). But across the river in Washington State the metro area is sprawling out and prices are rising there too.

These places are not expensive because of regulation, they're expensive because people want to live there and are moving there. Places people are leaving, like Detroit, are at the bottom of the growth chart and (Blue state) Michigan housing is cheap.

[Tory]

A landmark Harvard study a few years ago found a strong link between land-use regulation and higher housing costs:
http://www.heartland.org/Article.cfm?artId=10635

Now how that links to Red and Blue states is a different question, although a fair hypothesis is that Blue states embrace more govt regulation.

[Michael Wells]

Tory,

Sorry. Of course you're right, land use regulation is one of the factors that affects housing prices. I got into the fun of the debate, hurried and overstated my case. I meant to say that in most of the fast growing creative class cities, it's not the largest factor. A bigger effect is in-migration of people who can and do pay higher prices for close-in city living.

This plays out in red States as well as blue. Austin's median is above Texas and Raleigh's above N. Carolina, to name a couple of creative class cities in red states. As someone who grew up in California and has watched productive orchards bulldozed for subdivisions for decades, I find it hard see California as overregulating land use -- but the cities of San Francisco, Palo Alto, Berkeley, etc. may be overly restricting infill.

[noneed4thneed]

Many of the blue states are located on the coasts. Coastal land is more expensive than rural land that makes up many of the red states.

[Linda Reynolds]

This is a great article about the Florida Housing Market.