Julius Probst He pointed me to this interesting map:
When looking at a graph, it’s often useful to consider multiple factors. In this case, we see evidence of three independent factors at work:
1. Places with high population density tend to be more expensive.
2. Fast-growing places are more expensive.
3. Highly regulated places are more expensive.
Let’s consider these one by one. California and the Northeast Corridor (Washington DC to Boston) are both well above average in terms of median home prices. However, there are exceptions, such as much of the Mountain West, which has above average prices. Even sparsely populated states like Nevada and Montana are relatively expensive compared to much more densely populated Midwest states like Illinois, Michigan, and Ohio.
In recent years, the Mountain West has seen strong population growth while the industrial Midwest has seen its population stagnate. This perhaps explains why home prices are higher in the sparsely populated West than in the Midwest, and why there is an interesting mix of higher home prices in states with higher population growth rates, such as Texas and Oklahoma, Tennessee and Kentucky, and Georgia and Alabama.
But even here there are exceptions. The fastest growing population regions in America are now the Southeast (from Florida to the Carolinas), Texas, and Tennessee. And yet, despite their higher population densities, these states are significantly cheaper than the Mountain West. What explains this difference?
I suspect that much of the mountain west faces tough building barriers. This may partly reflect different attitudes toward zoning, but it also reflects the fact that much of the land in the West is federally owned. Even cities like Las Vegas and Phoenix, which have seemingly endless land on their borders, are limited to some degree by federal land and Indian reservations.
It is widely known that California’s regulations have caused housing costs to rise, leading people to seek places with lower costs of living. One might be tempted to think that the mountain west doesn’t face the same problems as California, because it is growing at a pretty rapid rate. However, the fact that places like Colorado, Utah, Montana, and Washington are much more expensive than Texas and the Carolinas leads me to believe that the housing policies of the western states are holding back population growth. Many young Americans are choosing Charlotte, Nashville, and Jacksonville over places like Denver, Salt Lake City, and Seattle, probably not because they prefer these places, but because housing costs make their desired locations prohibitively expensive. I think that if it were a true free market, with the federal government selling land, the mountain west would be growing even faster than Texas and the Southeast.
P.S.: The Mountain West may have newer housing stock than the Midwest, which may explain some of this discrepancy.
