Urban areas have benefited in recent years from an influx of younger workers seeking high-paying jobs. At the same time, land-use regulations have constricted supply, helping drive up prices. While the wealthiest homeowners had a rocky ride during the past decade, their homes have recovered most or all of the value they lost during the bust.
Reports of a sharp rise in home prices and an incline in interest rates are splattered across industry news headlines these days. The Wall Street Journal describes this tandem effect: “Higher mortgage rates tend to put a damper on price growth because they drive up the monthly cost of a mortgage,” and further asserts that this, “combined with the fact prices have risen faster than incomes could pose challenges to the market next year.” In effect of this fallout, experts such as David Blitzer, managing director at S&P Dow Jones Indices, anticipates that “mortgage interest rates rose in November and are expected to rise further as home prices continue to outpace gains in wages and personal income.” Conditions like these are fuel for the fire, igniting the volatility of the market and carving a great divide between “pricey urban and coastal areas and more affordable inland regions” which, according to reporter Laura Kusisto, are further “creating large swaths of winners and losers based largely on geography.”
Interestingly, The Wall Street Journal associates the geographical divide in home prices with the recent electoral vote and offers corresponding evidence. As stated, “In counties that voted for Mr. Drumpf, home prices have been largely flat for the past 15 years…In areas that went for Hillary Clinton – mostly coastal urban areas such as California’s major markets – home values plunged from 2006-2012 but have roared back since.” This widening of the gap can further be attributed to what Peter DeMarco, real-estate agent in rural Pennsylvania, calls a lack of attention “paid to the economy of us, the small people.”
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