The New Geography of Housing in America

Hosts

Derek ThompsonDerek Thompson

About the episode

Summary

• In the following excerpt, Derek and Conor Sen dive into the unusual state of the housing market around the U.S. and the reasons for rising vs. decreasing housing prices in different regions. 

  Derek Thompson: I want to start with your hometown of Atlanta. The Wall Street Journal recently published this big piece about how the Atlanta market, which has only known growth for the last few decades, is shrinking. Now it’s shrinking a very small amount, 1,300 people, but this idea that Americans have been moving in the last few years to the metros of and especially the suburbs of the Sun Belt, stretching from the Carolinas through Georgia into the Southwest, that narrative has been complicated a little bit in the last few months, and I think it really goes a long way toward explaining some important themes in today’s housing market. Just starting with your hometown of Atlanta, what’s going on there? Why do you think this tide has been reversed?

  Conor Sen: So I think our bread and butter historically has been to recruit businesses and talent from the Northeast, and the Midwest to some extent, to come here, and we sold them on cheap land, low taxes, cheap labor. Mercedes-Benz moved their North American headquarters from New Jersey to Atlanta, I don’t know, five or 10 years ago, and they put their name on the football stadium. And I think the high mortgage rates and the rise in housing prices have made that move a lot less economical. If you have a house in New Jersey at a 3 percent mortgage rate, maybe you don’t like the taxes or the politics of New Jersey, but now, with where home prices are here, that move isn’t very great, which is why home sales are down across the country.

  And then for people who are looking to move, affordability has become hugely important. And here, Atlanta just isn’t as affordable as it used to be. In town, where a college grad or a high-income person might want to live, that’s gone up a lot in price, and the COVID-era migration had a lot to do with that. And then where there is affordable land is really 30 or 40 miles north of the metro. And if you’re going to live that far out, why not move to an even smaller metro in the Southeast, where you don’t have the traffic, you’re not 30, 40 miles from the action? And so that’s where metros like Spartanburg or Savannah or Huntsville, places like that, have become more popular.

  Thompson: And if you wanted to go one level deeper on what happened to Atlanta, why is it so much less affordable now than it was maybe a few years ago? One option could be, well, it’s richer. So the price level’s just increased because more wealth has moved to the area. Another reason, which might resonate with what I’ve heard from Texas, is as you’ve built out places like Dallas and Houston, some of the remaining land that’s left to be built has enormous minimum lot sizes. So you can only build enormous homes on enormous lots, which means there’s nothing economical that you can really offer to a new buyer. And then lastly, I suppose, you have some macroeconomic stuff. Mortgage rates are really high, and so that’s going to affect affordability, I suppose, just about everywhere. What are you seeing as the main drivers of why Atlanta has become less affordable in the last few years?

  Sen: I’d say it was an arb from day one of what we have is an airport and highways and Starbucks and things like that. And you can get that cheaper here than you can in the Northeast. But the problem is, if that’s all you can offer, then eventually people have bid up the land near the Starbucks, near the Costcos, near the highways, near the airport, and then you haven’t really invested in infrastructure, public amenities, schools the way that other parts of the country, more richer parts of the country, have. And so it’s like, “Well, if you were selling yourself on costs and just a way of life, why don’t I go somewhere that is now what you were 20 years ago?” So there are other metros that are basically making the pitch Atlanta made 30, 40 years ago and can out-Atlanta Atlanta.

  Thompson: One really interesting thing that’s happening right now in American housing is that if you look at the national picture, we just hit a new record for highest median home price ever. And so you would think, all right, well, it sounds like home prices therefore are rising across the country. But when you break it down by region, it gets very interesting very quickly.

  In the Midwest and Northeast—if you live in Chicago, if you live in Iowa, Connecticut—every city in the metro around you is basically seeing rising home prices. If you live in the South and the West—if you live in Georgia, Texas, Florida, California—home prices are falling in basically every metro. I think that would really surprise a lot of people because it’s almost as if America is two countries right now from a housing perspective, one in which home prices are rising, another in which, in the South and West, home prices now are falling, which is the total opposite of what we saw four years ago during the pandemic. What explains that?

  Sen: So I think you have the two Americas you’ve been talking about. One America is the place where we build housing, and that’s everywhere from Florida to Texas to Idaho to the Mountain West, and those places have kept building over the past few years. And that’s where home builders have offered mortgage rate buydowns, they’ve decreased the size of homes, they’ve moved farther out. They’re doing what they can to meet the demand that’s there.

  But then the other is because migration is just down everywhere. Because people don’t want to give up their mortgage rate, their low mortgage rate, or they don’t want to buy and move states to move. Say migration is down 30 percent, and maybe part of the business model of a Florida or Texas is, “We’re going to get a certain number of people every year from Illinois and California and Connecticut.” And if that migration is down 30 percent, then your model just isn’t working because you expect … almost like a college town. If freshman enrollment was down 30 percent, a college town would have problems. The same thing for Florida, where it’s like if people just aren’t moving in general, that’s going to hurt Florida.

  This excerpt has been edited and condensed.
  

  Host: Derek Thompson
  Guest: Conor Sen
  Producer: Devon Baroldi