Harvard Economist Predicts Prices Will Stay Low

Harvard Economist Predicts Prices Will Stay Low
Harvard University economist Edward Glaeser discusses with Money Magazine where home prices will move next. He argues that older, colder cities are unlikely to come back because their initial growth was tied to transportation costs. Now that few goods are moved by water, their productivity – and number of residents – has declined.

Today, cities are likely to grow because they are located in warm areas where people want to live, Glaeser says. Cities like Atlanta, Dallas, and Houston that have a vibrant economy and a lenient building environment have gone through the housing meltdown with less of a decline in prices. These cities, he says, are likely to continue to attract residents, while their flexible approach to building regulation will keep home prices moderate.

But Glaeser doesn’t foresee property values rising to previous levels even in attractive locales. “The harsh reality is that real estate prices that go up come down. I've found that for every real $1 increase in local market prices over a five-year period, prices go down 32¢ over the following five years,” Glaeser says.

Source: Money Magazine, Lisa Gibbs (11/25/2009)