Global Superstar Cities

David Leonhadt has a fascinating piece in today's NYT on the "split" housing market:

[T]he high end of the market is surviving the slump much better than any other segment. Even as foreclosures keep rising and overall sales continue to plummet, more expensive homes have staged a bit of a comeback in recent months. They’re spending less time languishing on the market than others, and their prices appear to be holding up better. ... The upper end of the market has also been helped by an influx of well-off foreign investors whose buying power has grown with the recent decline of the dollar. Hard as this may be for an American to imagine, New York, San Francisco or Miami can now seem like a bargain, compared with London, Moscow or Sydney.

It's clear that the housing market in key cities and mega-regions has become globalized.  In this sense it bears some parallels with what has happened to elite universities, where foreign students vie for top slots.  The housing market in cities that are atop the world city system -  like London, New York, Toronto, San Francisco, Vancouver, LA, and others in the US and around the world - has been globalized.  This not only drives prices up at the top end, it puts tremendous pressure on the entire market in those areas, making them even more unaffordable for average people and even for the upper-middle class.  My hunch is this problem - and the split nature of the housing market - will continue to worsen for some time.

Comments

[DJM]

Really fascinating... your comparison too universities appears spot on and is interesting way to view it. It would be interesting to revisit the recent Duke (Vivek XX?)/Berkeley (Annalee Saxenian) paper on immigrant entrepreneurs nationally and compare it to housing values. Also would be interesting to look at foreign student attendance #s and compare to metro real estate...
NOVA/Montgomery County Maryland here in DC is a prime example. As are LA and SF/SV... Interesting stuff Richard.

[Michael Wells]

The same thing is true within the US itself. Portlanders have long complained about Californians who have sold high priced SF and LA homes moving here and driving up our housing prices. One of my daughters is moving here from Seattle, where they sold a small house and are buying a larger house here for $100,000 less. They're not in the high end market per se, but at significantly more than the median price.

I think a part of this is that the move is between the creative class cities. It may be attractive for someone to move from San Francisco (or London or Sydney) to Portland or Seattle and profit from the price differential -- but it has to be somewhere they want to live. Housing prices are much lower in Nebraska and North Dakota, but they're losing population because few people want to live there.

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