Housing Bubble Watch: Fed Economist Says It May Not Be a Bubble

Soaring housing prices in Northern Virginia, Suburban Maryland and the District of Columbia may not be a “housing bubble”, says Raymond E. Owens, an economist with the 5th district Federal Reserve Bank. Rising household incomes in the Washington area, strong demand and restricted supply helps explain high housing prices in the Washington metro area, he told the Greater Washington Initiative earlier this week.

“Demand has been high in the Washington area partly because housing creation has not kept pace with job creation in recent years,” Owens said. “A ‘bubble’ is created when prices go up without any underlying economic reasons. But that’s not entirely the case in the Washington area, though we will only know the future path of area housing prices with the benefit of hindsight.”

“Residential building lots apparently aren’t being created fast enough to meet the demand,” Owens said. “Land developers say that the need to comply with environmental requirements, zoning laws, and delays in putting the necessary infrastructure in place – roads, water, electricity and sewer lines – limits residential lot development and thus the number of area houses being built. They tell us that it can take upwards of three years or more to take a housing project from start to finish.” (For details click here.)

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  1. Anonymous Avatar

    Put 10 economist into a room, and you get 10 different answers.

  2. Abitmorered Avatar

    This is what the housing industry (major national homebuilders and suppliers) believe.

    Over the next decade more than two million people will be moving into the Metro area. The builders, running full steam, will not be able to meet all the apparent demands. So housing will continue to be in demand in this area for along time.

    The shortage of new homes will continue to boost resale and renovation.

    My hope is to see more build outs and tear downs to help rejuvenate depressed areas.

  3. No tear downs please…reuse. Tear downs just result in vacant lots.

  4. Abitmorered Avatar

    Althought vacant lots are better than old crumpling housing (so long as the lot is not left as a dumping ground) I mean to build on that empty lot.

  5. I think I just oppose the general policy of teardowns. It’s obviously neccessary in some cases, but people get a bit teardown happy sometimes…and we lose historic buildings.

  6. Ray Hyde Avatar

    It’s nice to see that someone agrees with my observations: our housing crisis is (largely) caused by institutional delays in creating enough building lots – of whatever size.

    EMR has told me I was alone in my thinking.

  7. Abitmorered Avatar

    I understand Paul. I’m a history buff, myself. I’m talking about older post war housing and old strip stores that have seen their day and are anything but historical.

  8. subpatre Avatar

    Abitmorered, Paul’s warning is still a good one. With the addition of one word, your post is almost the same as a Mayor I knew; prior to his razing 6 blocks of 100 year old buildings.
    I’m talking about older post Civil war housing and old strip stores that have seen their day and are anything but historical.

    Today’s homes will be tommorrow’s history. Whether they’re worth keeping is another matter, not everything old is worth preserving. But the free market makes better choices on that, especially aesthetic choices, than government action.

  9. Anonymous Avatar


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