The Myth of “Superstar Cities”
Despite much wishful thinking, there is no reason to believe that housing prices in glamorous cities like New York, London, and Paris will continue to rise relative to prices elsewhere. On the contrary, there are many reasons to worry about investing in such places.
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In a much-talked-about recent paper entitled “Superstar Cities,” economists Joseph Gyourko, Christopher Mayer, and Todd Sinai argue that such high-status cities – not only London, Paris, and New York, but also cities like Philadelphia and San Diego – may show an “ever-widening gap in housing values” when compared with other cities. The authors seem to be saying, in effect, that a housing boom in these areas can go on forever.