September 27, 2004

WSJ: Coastal Homeowners Are Now Cashing Out has an article about coastal homeowners cashing out and using their profits to buy less expensive houses outright in less expensive markets.
Is it time to take profits on the real-estate boom? The huge rise in prices in thriving cities on or near the coasts has created an arbitrage opportunity for people who have the flexibility to move: Sell Manhattan, buy Montana. Over the past five years, raging real-estate markets in some coastal areas have more than doubled housing prices, while farther inland prices have risen more moderately. That has stretched the price gap between the middle of the country and the coasts far beyond the norm. The typical home price for the 10 American metropolitan areas with the highest housing prices has jumped to 230% of the national median from 155% five years ago, according to an analysis by for The Wall Street Journal.
The main justification for the current house prices that is given is the shortage of supply in hot housing markets. While I think that argument doesn't have much merrit on its face, it's worth pointing out that this is one way a supply shortage could reverse itself. Posted by dapkus at September 27, 2004 10:07 PM