A readable lesson in urban economics

Can be obtained by reading "ON THE HOMEFRONT; Holding On" from the New York Times special Real Estate magazine Key. From the article:

Yet the gap between the most expensive cities and almost everywhere else is now wider than it has been in decades, if not longer. This seems to be one of those anomalies — like dot-com companies with soaring stock prices and no profits — that shouldn’t be able to survive a bursting bubble.

But that’s not exactly how the bust is playing out so far. Prices are indeed falling in San Francisco and New York. But they’re falling fastest in another category of once booming areas, like Las Vegas, Phoenix, Sacramento and South Florida. ...

What, then, can explain the contours of this housing bust? The best answer is that the sheer scale of the bubble obscured another — in all likelihood, more lasting — trend: despite all the ways that technology has made distance matter less, geography matters more. ...

“The essence of cities is physical proximity,” explains Edward Glaeser, a Harvard professor who specializes in the economics of geography. “They’ve always had the advantage of making the movement of people easier, the movement of goods easier and the movement of ideas easier.” What has changed over the last few decades, Glaeser says, is that good ideas — be they in finance, entertainment, technology — have become much more valuable. The best ones can be turned into products that are soon being sold all over the world, thanks to globalization, FedEx, the Internet and a host of other forces. But it’s still much easier to come up with a good idea when you are surrounded by a lot of other people working on the same problems as you are.

Now sure, the superexpensive units, or the houses with real problems, aren't going to sell as fast as they once did. But they will still sell, because the housing market is deceptive. It's not just a big market of people-buyers-consumers. It's also a market of a bunch of "ones." You only need one person-household to buy a place, and as long as their needs can be met, considering a wide variety of issues, and constraints, they'll buy even that whacked house in Brookland that's basically one bedroom... selling for $350,000, but walkable to the subway station.

In Columbus, Ohio, it wouldn't sell. But we're not in Columbus Ohio or Prince William County, Virginia.