NEW YORK CITY’S HOUSING BUBBLE, 2005-2006 Presented by John Tepper Marlin, Principal, CityEconomist.com, NYC, at the Eastern Economic Association, Philadelphia, February 23, 2006.
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(A) Have NYC Housing Prices Grown Faster than the NYC CPI? Housing prices historically have kept pace with overall inflation.
(B) Have NYC Housing Prices Grown Faster than Personal Incomes? Higher housing prices must over time be supported by higher incomes.
(C) Are NYC Mortgage Payments Higher than Rents? Rents typically move in tandem with home prices.
Chart 1. Growth in Shelter Cost and CPI, NYC, 1/00-6/05
- Mean sales price rose 70.8% (to $1,004,232 from $710,788). Prudential
- Median sales prices rose 51.8% (to $605,859 from $399,000). Prudential
- Mean price per square foot rose 46.9% (to $767 from $522). Prudential
Source: Dodge Analytics, McGraw-Hill Construction Data.
Source: Data from www.bankrate.com.
Source: Calculations by NYC Comptrollers Office.
Sources: Karl E. Case, John Quigley, & Robert J. Shiller, “Comparing Wealth Effects: The Stock Markets versus the Housing Markets,” NBER Working Paper, October 2001. Wealth effect is cited as 7% for housing assets by Stephen Roach, “The Asset Economy,” Steve Roach Weekly Commentary, Morgan Stanley, June 21, 2004, 3. The wealth effect is cited as 5% for housing assets by Richard W. Peach, “Are Home Prices the Next Bubble?”, Economic Policy Review, Federal Reserve Bank of New York, December 2004, 2.
Source: Misery Index for 3Q05 – NYC Comptroller’s Office, 2005. Projected 2006 GDP growth and U.S. misery index are based on Feb. 10, 2006 Blue Chip consensus.