June 22, 2018

In these last few decades, as Americans have flocked to major metros, two economic trends have surfaced. The first one, proven continually by coastal metros, like San Francisco and New York, is the law of supply and demand. That is, if a metro has fast population growth but limits housing supply—by maintaining what economists call an inelastic housing market—prices will increase far more than in an organic system. That’s common sense.

But another economic trend, far less explored, is the way that even elastic housing markets can struggle with high home prices, thanks to the inherent demands that come with fast growth. Some U.S. metros, after all, are increasing their populations by the high five or low six figures annually. While their housing growth is rapid, it is near-impossible for closings to occur fast enough that the market clears. So there will be ongoing housing shortages that inflate prices in certain areas and squeeze out certain demographics. This means, in plain terms, that the working class won’t always be able to find affordable housing in ideal locations.

Atlanta is one example of where this scenario plays out…[read the rest here]

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