The Boston area has been hurt pretty badly by high real estate prices. Young, talented professionals feel that if they're going to be unable to afford a home, they might as well move to SF/BayArea, where they're still unable to afford a home but at least have the chance to work on interesting projects that may one day let them afford a home.
Vancouver BC is having serious trouble with out-of-control real estate prices, where a huge volume of purely speculative transactions overwhelmed anyone actually trying to live there.
Crime didn't kill cities, crime is the result of their death. White Flight to the suburbs wasn't fleeing crime, it was concentrating it.
Vancouver BC is having serious trouble with people whining about real estate prices. My younger sister bought 6 months ago. My older sister bought last month. My parents are buying this month.
The problem with Vancouver is that Vancouverites don't save their money for a down payment.
For example, my parents have worked modest, blue collar jobs all of their lives and moved to Vancouver 2 years ago and are able to purchase. My younger sister is a financial advisor and diligently saved with her husband to purchase a home in their mid twenties. My older sister is at the other end of the spectrum. She's a C-level executive and was able to save and purchase on one income.
The out-of-control prices comment is ridiculous. Work hard, save your money, and it is possible.
The out-of-control prices comment is not ridiculous. I also think people probably don't save as much as they should for a down payment (and not just in Vancouver), but even if they did it is hard to look at home prices in Canada and not think we also have a bubble of our own waiting to pop. Our average household income grew at a much slower pace than real estate prices over the last ten years (adjusted for inflation the growth is virtually flat or negative for some professions), and our debt has increased considerably. This is not sustainable over the long term. I mean, the average home price in Vancouver is what, 600K? This is definitely out of control in my book.
I think that if people pay taxes, they have the right to complain that their government isn't keeping a proper lid on real estate prices. We pay taxes, among other reasons, to be protected from barbarians and invaders-- and what exactly are real estate speculators, after all?
Replace "too crowded" with "too popular". Real estate prices will rise and fall to reflect demand. If prices are ridiculously high, that's because lots of people really want to live there.
(By the way, I'm not disputing anything you said. pg's point about real estate prices is what reminded me of the Yogi Berra quote.)
Real estate prices will rise and fall to reflect demand. If prices are ridiculously high, that's because lots of people really want to live there.
Or:
1. It's extremely difficult to build. Only moguls can build new properties in New York, hence the emergence of the massively overpriced "luxury buildings" with unnecessary and expensive conveniences.
2. Government irresponsibility. The New York government should be barring the parentally-funded nonproductives
(e.g. fashion interns who whine to their daddies and get $5000/month apartments and useless hipster idiots) from living here, because of their effect on the rents, but right now that isn't happening.
We, as a society, are paying dearly for the sin of forgetting that not everyone deserves to live in nice places, and that culture rather than money should be the deciding factor (the mortal enemy of the good are those who are both uncultured and wealthy, who are like blind, rampaging, destructive animals).
I would much rather deal with a bureaucratic inconvenience such as this than get robbed blind on rent, and have absolutely no recourse. In other words, my answer is yes, because that would be an absolute improvement over the current, disastrous arrangement.
> Empirically, what seems to kill cities is crime, or the death of some industry they depend on.
That second cause is interesting. What if, instead of dying, the industry were to just leave? San Francisco's benefits are built on network effects, and if the network shifts away, why remain?
I've never heard of an example of a city that died from high real estate prices. Do you know of any?
New York in the '70s. I wouldn't call this "death" since the city came back, but I wouldn't want to repeat that debacle.
It's not high real estate prices per se that kills a city per se, but real estate volatility. When real estate prices are high, repairs aren't made because there's no need to-- apartments sell themselves. When they're low and vacancy rates are high, repairs aren't made because there is no point.
High real estate prices and rents also impoverish a city; they draw money out of it, since most of the ownership is outside of it (cf. New York, where absentee assholes own most of the rental property). Some people in the city benefit, but the net effect is negative, especially since the young and talented are invariably on the butt-end of property prices/rents. During the boom, this isn't a problem, but after the boom ends, prices and rents remain high ("sticky" is the economic term) and this drains the city like a vampire.
Ten years later, due to disrepair, poverty, and exodus of talent, you have a shell of a city. Then the crime starts, and the city falls into an arrangement like New York in the 1970s nightmare.
What's difficult, if not impossible, to predict is when this transition will take place. It's likely to hit New York, but I have no idea if that will happen in 2011 or 2030. The tricky problem with bubbles (and New York real estate is still in a bubble, despite the semi-collapse of the national property bubble) is that it's very difficult to predict when they pop, although inevitable that they will.
What happened to NYC in the 1970s was the same thing that happened to most other US cities at the same time. It wasn't caused by the high cost of living there. And in fact NYC has bounced back better than almost any of the others.
When real estate prices are high, repairs aren't made because there's no need to-- apartments sell themselves. When they're low and vacancy rates are high, repairs aren't made because there is no point.
How does that make sense? You're arguing that repairs are not worth it if it's easy to sell apartments (what does that mean? That the new tenants do repairs, or that everyone is willing to live with a leaky sink as long as they pay for it?). Or that repairs only happen when apartments can sell (so you'll only let the sink leak if you're going to live with it for a long time).
The utility of repairs can be positively or negatively correlated with real estate prices, but it's ridiculously unlikely for it to be both.
For what it's worth, I've lived in cheap and expensive parts of New York, and, miracle of miracles, people took better care of apartments they paid more for. As it turns out, it really stings if you'd be able to rent someone a loft for $8,000 a month, but you can't because they saw that that ceiling was cracked. People paying $400/month for a room aren't nearly as picky.
I've never heard of an example of a city that died from high real estate prices. Do you know of any?
Empirically, what seems to kill cities is crime, or the death of some industry they depend on.