Paul Krugman and others have been talking about the housing bubble and how history (such as the Los Angeles real estate bubble of the 1980s) suggests that housing prices are in for a 20% or 30% fall. History shows that you can never reliably predict the future based on the past, but it may well be true. However, it seems to me that on top of whatever national or regional dynamics are taking place in the housing market, that there is another dynamic going on as well: a slow-motion transportation revolution.
The summer after I got out of college in 1989 I had a research grant and I did a summer's worth of reading about urban planning issues, and I became determined to live somewhere where I didn't need a car (when my grant was over I moved straight to New York City in fact). And I've pursued that vision ever since. Having apartment-hunted fairly regularly in the years since, I have noticed that more and more people have caught on to the fact that living near public transportation where you don't need a car, is worth paying a premium for. I am still consistently surprised by how comparable some prices are in transportation-accessible and -inaccessible places – but less and less so as the years go by. I think people are catching on.
Of course, my observation is anecdotal, but there are reasons to give it credence. First, it has coincided with/been part of the whole revival of cities that has taken place in the same past 20 years. Second, driving is increasingly being seen for what it is – work – and people generally don't like to work more than they have to. Third, roads are a non-scalable form of transportation, so the urban-planning train wreck, the utter folly that transit deserts like Tyson's Corner Virginia represent (and Fairfax County as a whole, and the many many places like it all over America) is becoming more apparent to more people.
So, in addition to the housing bubble we are now seeing, I think that there has been a relative rise in the prices of urban, close-in, and transit-accessible real estate that is NOT a function of a bubble, but a function of a re-valuation of the property. I guess we won't know for sure until things settle down, which history suggests could take 4-5 years. Meanwhile, rising oil prices may intensify the trend even more.
A few years ago there were riots in France. They took place in the suburbs. The reason? Because in France, that's where the poor people live. Within a few decades we may reach the same point in this country. Some suburbs will get spine transplants (ie rail, like parts of Los Angeles), and begin to transform as a result, while others may turn into weird suburban slums.
