by Ryan Avent

Let's move on to the next question: have gas prices caused devastation in suburbs, and/or will they in the future? As with resurgence of center cities, gas prices have only exacerbated a pre-existing condition--in this case, the housing bubble collapse.

There are non-gas reasons the collapse has been focused more heavily on exurban areas than on center cities. One is that the boom manifested differently in different places. In center cities, where regulation and NIMBYism make it more difficult to build, supply never came close to keeping up with the price signals in the market, so prices shot up. In outlying areas, there were few such constraints, so every increase in price resulted in heaps of new construction. Since prices were speculatively driven and everyone was building at once, supply significantly overshot in many places.

So when the bubble evaporated, center cities had to work off a lot of over-pricing. They've had advantages in doing this, however. One is the existence of excess demand. People who couldn't buy during the boom now find themselves able to do so, which has kept vacancy rates from growing excessively. Another advantage has been that high center city prices prevented financially marginal households from buying. This is bad from an equity standpoint, but has also meant a lot fewer foreclosures in the center.