Justin Fox has another of his very pretty charts today, showing the evolution of house prices in 20 different cities between January 2005 and November 2007.
Let’s say I allowed you to go back in time to January 2005 and enter into a house-price swap, which would pay out the Case-Shiller result for a city of your choosing at the end of 2007. Which cities do you think would have done the best, and which would have done the worst?
I might have guessed that New York, seemingly immune to bursting bubbles, would be at the top of the list, while imploding Miami would be near the bottom. But in fact Miami did so well over the course of 2005 that it’s still significantly higher up the list than New York.
And New York is not exceptional in the slightest. Not only is it right in the middle of the list, but its end-2007 level is pretty much identical with the other three most important US cities: Los Angeles, Chicago, and Washington DC.
It turns out that, with hindsight, your best bet would have been the Pacific Northwest: Portand and Seattle are at the top of the list. And your worst bet, by far, would have been Detroit, far removed from any housing bubble. The worst bubble-bursting story is San Diego; the best bubble-bursting story is Phoenix, which while well off its highs is still showing house-price gains of something over 25% since the beginning of 2005.
Of course, if you chose another starting point, the results would be very different. But this graph does at least show that if you bought your house before 2005, you can count yourself unlucky indeed if you’re presently upside-down.