It is a truth universally acknowledged that the currently high price of housing in the UK, indeed most of the developed world, is due to housing shortage. The graph above shows (1) house prices in Phoenix and Detroit, 1991-2017, and (2) Detroit population 1820-2017. Beware of the differences in time scales.
It is clear that there is a similar pattern in the Detroit and Phoenix prices. They grow a lot in the noughties, peaking around early 2007. Then they collapse a lot, reaching a trough 2009-2012. Then they head back up again. You can see the same pattern across the US and in the UK (but not in Vancouver and Auckland, where they didn’t stop in 2007 and just kept heading up).
The rule of ‘same effect, same cause’ doesn’t always hold, but there is a suspicion that there is a single phenomenon underlying this. What could it be?
Well it can’t be housing shortage, at least in Detroit. Its population shows a consistent decline from its peak in the 1950s. Everyone has seen those pictures of whole areas that have reverted to countryside, because no one wants to live there. Clearly there is no housing shortage in Detroit. We could make a cautious inference that whatever common cause explains the upward and downward swings in prices is unconnected with population.
The population growth of Phoenix (not shown) since the 1950s has however been massive. One theory explains this by air conditioning. Detroit is a cold and miserable place in the winter. Phoenix is nice and sunny, and it doesn’t matter it is a bit of a furnace if you have AC. That I mention the theory does not indicate agreement.