OUR HOUSING COSTS IN A BROADER PERSPECTIVE: DOES BEING NUMBER ONE CUT TWO WAYS?

This year has seen a great deal of attention focused on the area's lack of affordable housing. This is a complex issue. Nationwide, there was a huge real estate bubble, which only burst in the last year or so. Since 2001, there has been a tremendous run up in the cost of real estate, fueled in part by speculation and easy money, and also by general prosperity as reflected in the bull market on Wall Street. Therefore, the last few years may not predict the next few years for housing costs.

In general, people follow what is known as a flight to quality. Over time, people select residences in locations they think afford them the highest quality of living possible. That's how we do things in our politico-economic system. As you will see from the data below, people have voted with their feet and have decided our area is a very high quality place to live. This naturally puts pressure on the price of living here. That is not alterable in terms of macroeconomics. Yes, the median cost of housing here is high, but long term this sorts itself out by people making their own personal flights to quality [as in how much they want to spend on housing, what kind of environment they seek, schools, crowding, taxes, pollution, commute times, etc]. In a separate posting I shall discuss what I see as some of the nitty gritty points to consider when one mentions 'affordable housing'.

There are lots of data available for us to examine, although time points do not overlap exactly. From 2000- 2005, the median price of a home in Virginia increased 69%, according to the Virginia Housing Coalition. During that interval, statewide there was a 72% increase in the number of families spending over 50% of their income on housing. From 2004 to 2007, the median price of a home increased about 20% in the County, and 37% in the City. In fact, as the housing market started to tank, prices in the County retreated 5% last year, but in the City they rose 18%.

Money magazine recently revisited communities which it had previously ranked as Number One Place to live. That rating has not uniformly led to jumps in the median price of homes. Again, the data points are uneven. I have listed the locales in terms of length of time since each was ranked Number One. Allowing for inflation, one would expect to see the greatest increases in median home prices with the longest duration since having been designated a Number One Place to Live, but that did not occur:

Seattle was Number One 18 years ago; its home cost has risen 3 fold since that ranking.
Raleigh, Number One 13 years ago, has risen 1.5 fold since being ranked.
Gainesville, Number One 12 years ago, has risen 2.5 fold since its ranking.
Nashua, New Hampshire, Number One 10 years ago, has risen 1.5 fold.
Charlottesville, Number One 9 years ago, is up 2.5 fold since then.
Rochester, MN, Number One 8 years ago, has not had an increase.
Sarasota, Number One 7 years ago, has had a 2.5 fold increase in housing costs.

Being ranked Number One does not in itself cause huge jumps in the cost of housing. Towns may need 'curb appeal' just as homes do, and clearly some have more than others- like Charlottesville and Sarasota. Our curb appeal is pulling people to our area. None of us want to end up looking like Fairfax County! The most drastic changes to come will be in County areas as they are developed. I tend to avert my eyes as I watch the dance that plays out among developers, land owners, citizens already in place, and the Albemarle County Board of Supervisors. It is very hard for those issues to end well for all concerned. Impacts of County development on the City are both tangible and intangible. For example, in a concrete sense, the folks living on and near Old Lynchburg Road are currently experiencing a huge decline in the quality of the neighborhoods, in terms of increased traffic from developments just south of the City-County border. Intangibly, this area we all love is being paved over, and the vistas which called us here, or which have kept us here, are slowly eroding. Or does it just seem slow because we are spending more time crawling in heightened traffic flow?

Overall ,on the national stage, we are viewed as a very desirable place to live, and there is only so much we can do locally to manage that perception. There will be ongoing pressure on housing costs, and much of the pressure is beyond our control.