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Julius Probst directed me to this interesting map:

When looking at a graph, I often find it useful to consider more than one factor.  In this case, I see evidence of three independent factors at work:

1. Densely populated places are more expensive.

2. Fast growing places are more expensive.

3. Heavily regulated places are more expensive.

Let’s consider these one at a time.  California and the Northeast corridor (DC to Boston) are both well above average in terms of median home prices.  But there are also some anomalies, such as the above average prices in much of the mountain west.  Even thinly populated states such as Nevada and Montana are relatively expensive, at least compared to midwestern states such as Illinois, Michigan and Ohio, which are far more densely populated.

In recent years, the mountain west has experienced significant population growth, while the industrial Midwest has had a stagnant population.  This probably explains why the more sparsely populated west is more expensive than the Midwest, and also some other interesting pairs of states, such as Texas/Oklahoma, Tennessee/Kentucky, and Georgia/Alabama, where in each case the faster growing state is more expensive.

Once again, however, there are some anomalies.  Some of America’s fastest population growth is now occurring in the southeast (Florida to the Carolinas), Texas and Tennessee.  And yet these states are still considerably cheaper than the mountain west, despite a denser population.  What explains that difference?

I suspect that regulatory barriers to building are tighter in many parts of the mountain west.  This might partly reflect different attitudes toward zoning, but also the fact that much of the land in the west is owned by the federal government.  Even cities such as Las Vegas and Phoenix, which seem to have limitless land on their borders, are somewhat hemmed in by federally owned land or Indian reservations.

It’s widely known that regulation in California is driving up housing costs, and that this is driving people to seek places with a lower cost of living. Because the mountain west is growing at a fairly good clip, one might be tempted to assume that these states do not face the same problems as California.  But the fact that places like Colorado, Utah, Montana and Washington are far more expensive than Texas or the Carolinas leads me to believe that housing policies in western states are reducing population growth.  Many younger Americans are probably choosing Charlotte, Nashville or Jacksonville over places like Denver, Salt Lake City or Seattle not because they prefer those locations, rather because housing costs make their desired location prohibitively expensive.  In a truly free market where the federal government sold off its land, I suspect the mountain west would be growing even faster than Texas and the southeast.

PS.  The mountain west may also have a newer housing stock than the Midwest, which may explain part of the discrepancy.

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