Housing Bust by Home Price Tier

The St. Louis Fed has a nice one-pager that illustrates how the housing boom differed across homes in different price tiers.

In each of the four cities they examine (Boston, Cleveland, Phoenix, and Tampa), low-priced houses experienced the biggest boom (a relative concept in Cleveland, to be sure) followed by the biggest bust:

The authors interpret this as evidence that:

Middle- and upper-tier home buyers were more insulated from many of [the factors that drove the boom and bust in the prices of low-price tier homes]. They had less need for the newer mortgage products, as most of these consumers were not first time buyers. As homeowners, they had equity to put toward their purchase, in contrast to most lower-tier first-time home buyers.

The pattern is particularly striking in Phoenix, where the price index for low-price homes has now fallen below the indices for middle- and high-price homes.

About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

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