Why Housing Prices vary from Place to Place

Elizabeth Kuhnen

You’ve probably heard people mention the comparison between the cost of homes in varying cities, states, and even countries. For example, a mansion in Texas is nearly a quarter of the price of a mansion in California. Or how a million dollar condo in NYC, is the size of your $100,000 house living room. According to Edward L. Glaeser's article, "Housing Supply," for the National Bureau of Economic Research, “The West Coast city of San Francisco has a median home cost of $500,000.” Contrary to that , CNN Money stated that in Minneapolis, “Median home price of $157,000 in 2011.” But what exactly determines the prices? Why do they vary from place to place? 

It is more than just the size of a house that affects the house price. One critical factor is supply and demand. For example the demand can go up if the wages increase for citizens with more employees people have a larger budget for their home. However, there can be a decrease in demand if the wages decrease, or if there are higher interest rates. On the other hand, if there are less houses being built, there is more competition, and there are not enough buyers to keep up the new houses. In particular, one large reason why California charges so much for their housing is because they haven’t built enough for it. There is such a high demand to live in California, and this pairing causes for more competition. People are willing to pay a lot of money for housing in California. 

But why is this? Why do people want to live in California, or other places with such high mortgages? Well another indicator for the pricing is location. According to Investopedia, what makes a good location is: centrality, neighborhood, development, and lot. Another thing is the number of shared goods. For example, NYC is filled with shared goods, but someone has to pay for it. Living in NYC is a lot more expensive than anywhere else. Not only that, but when there are pretty views, nice trails, efficient entertainment, and tourist attractions, there is a higher demand in the market. Places like NYC and California not only have efficient entertainment, but also stores and beaches right outside your back door. These things can really impact the interest rate in buyers, and because of this, they are willing to pay more. 

Access to cities in Texas is a lot harder for residents, compared to NYC. Texas also has a lot of land and space. Finally, Texas also has lower wages compared to other states. According to KVUE, the minimum wage in Texas is $7.25. But in NYC, “minimum wage rate of $15.00 per hour” (JDSPURDA). Overall, by looking at these statistics, you can gather that there are many different economic and environmental factors that result in the prices of homes across the world, even specific to the US. 

Works Cited 

“8 Critical Factors That Influence a Home's Value.” Opendoor, 19 Sept. 2019, https://www.opendoor.com/w/blog/factors-that-influence-home-value.

Comme, Author: Pamela. “Experts Say Texas Minimum Wage of $7.25 an Hour Is Not Livable.” Kvue.com, 29 Jan. 2022, https://www.kvue.com/article/news/local/experts-texas-minimum-wage-725-not-livable/269-49011d46-728d-4759-9341-1e8f3d3ae350. 

Levin, Matt. “5 Reasons California's Housing Costs Are so High.” KQED, 4 May 2018, https://www.kqed.org/news/11666284/5-reasons-californias-housing-costs-are-so-high. 

Olizarowicz, Brittany. “Why Are Houses in Texas so Cheap? (Top 10 Reasons).” Home Mindset, 30 June 2021, https://www.homemindset.com/why-are-houses-in-texas-so-cheap/.