Ready, Fire, Aim! - Mihail's Public Blog: "Sell Manhattan, buy Montana"

Saturday, September 25, 2004

"Sell Manhattan, buy Montana"

Interesting Wall Street Journal story (subscription required) which reflects what's happening around us in the Bay Area. Our contractor who was working in our house over the last few days told us that he has already sold his house in Sacramento for a tidy profit, and that his wife and he are moving to Bend, OR in January.

The real estate market is on fire in the central, popular parts of both coasts -- although there are signs that it is beginning to slow a little; we recently saw a ClockTower loft in SF that had been on the market for over 30 days -- giving people, as the WSJ puts it, an arbitrage opportunity to sell high and buy low. With intererest rates at their current lows, suddenly a million dollars for a fixer upper seems affordable for many who need to, or want to, be in the Bay Area.

So began a debate that is rumbling across many kitchen tables on the East and West Coasts: Is it time to take profits on the real-estate boom? The huge rise in prices in thriving cities on or near the coasts has created an arbitrage opportunity for people who have the flexibility to move: Sell Manhattan, buy Montana.

Over the past five years, raging real-estate markets in some coastal areas have more than doubled housing prices, while farther inland prices have risen more moderately. That has stretched the price gap between the middle of the country and the coasts far beyond the norm. The typical home price for the 10 American metropolitan areas with the highest housing prices has jumped to 230% of the national median from 155% five years ago, according to an analysis by Economy.com for The Wall Street Journal.

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