Rising home prices set off fears that real estate will become even more expensive, making it impossible ever to buy a home in a given city.
It’s easy to understand how such worries spread, but the historical record suggests that these fears are generally exaggerated. Cities with steep price increases today will probably have much smaller upticks in the future. And for the most part, differences in price increases among cities are well explained by short-term variations in employment growth.
Consider some recent trends. In the year ended in March, cities like Denver, Seattle and Portland, Ore., had employment growth of more than 3 percent, according to the Bureau of Labor Statistics, along with double-digit home price increases, according to the S.&P./Case-Shiller indexes. At the same time, employment growth has been relatively tepid in cities like Boston, Cleveland and New York, and so have home price increases.
…Given these facts, why do people still worry that home prices are getting out of reach? The answer can’t be found in the housing data. Instead, these fears may reflect anxieties about other issues — like income inequality, globalization and the threat of job losses because of robots and artificial intelligence. In prosperous cities, rising prices may connote economic exclusion.
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