By Arnold Kling
Kenneth Harney reports that prices for condominiums rising have shot up.
whereas the nationwide median price of single family resale homes was up by 7.4 percent during the past year (to $169,900 at the end of the second quarter), the median resale condo price was up 15.1 percent during the year (to $163,500).
There are issues with using the national median as an indicator of home price trends. In particular, the mix of sales among regions and other factors can affect the median.
Regardless, my view has been that condominiums are high-beta houses. That is, when house prices rise, condominium prices rise faster. When house prices fall, condominium prices fall faster. A large proportion of the cyclical component of housing demand consists of potential homebuyers choosing to either get into the condo market or stay out of it.
For Discussion. Harney strongly implies that the hot condo market is a secular trend rather than a cyclical phenomenon. How would one assess which is the case?