The other day, I wrote fairly tongue-in-cheek about dentists, their investment choices, and the housing "bubble". In that article I linked to several much weightier analyses, if you are interested in the topic. The Commons Blog has chimed in today with an interesting point about "smart growth" policies (which I have derided in many other posts):
But few reporters have bothered to ask why some markets have a bubble while
other fast-growing markets do not. The usual answer is that the bubbles are on
the coast because everyone is moving there, but many fast-growing regions in the
West and South do not appear to have a bubble.
The answer appears to be that "smart growth" and other growth-management
policies restrict housing supply. Since housing is an inelastic good, a small
restriction on supply leads to rapid increases in prices. This brings
speculators into the market -- and a large percentage of homes today are being
purchased with no-down-payment, interest-only loans by people who don't plan to
live in the homes; in other words, speculators.
A list of regions that are suffering bubbles reveals that a very high
percentage have implemented some form of growth management such as urban-growth
boundaries, greenbelts, or restrictions on building permits.