Posted by lex, on February 14, 2008
Chalk one more victory to the side of market regulation by Wise Government Bureaucrats:
Backed by studies showing that middle-class Seattle residents can no longer afford the city’s middle-class homes, consensus is growing that prices are too darned high…
An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.
Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.
“In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations,” he says
Even as legions of over-taxed Californians cashed out their equity in the 90’s and headed towards greener pastures up north, Seattle acted to limit growth, requiring rural landowners to keep their property in its “natural state” rather than selling out or parcelling. A seller’s market ensued, which is of course, an unalloyed good for those fortunate enough to be “vested” in home ownership. But this is a zero sum game:
(Renters) suspect they’re being priced out. And they’re right, according to a housing-affordability index created by the Washington Center for Real Estate Research at Washington State University.
Last summer, King County’s potential first-time buyers earning the median family income ($75,143) had just 37 percent of the financial wherewithal to buy the median-priced single-family house ($477,000) at the prevailing interest rate (6.47 percent).
Five years earlier, when King County’s median-priced house cost $282,500, median-income, first-time buyers possessed 72 percent of the income needed.
Markets aren’t perfect, but they’re better than any alternative. Remember this when government agents interfere with the free exchange of value: The ensuing inefficiences all but guarantee that the guy with the fewest resources is the one who gets the shaft.