DealBook: Re/Max Files for I.P.O. as Housing Market Continues Upswing

U.S. Housing Starts and Permits Rise Less Than Expected

The data on Friday suggested that a recent spike in interest rates, in anticipation of the Federal Reserve tapering its massive bond purchases as early as next month, was starting to have an impact on households.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment slipped to 80.0 from July's six-year high of 85.1. August's reading was the lowest in four months.

"People have been shocked by how much mortgage rates have risen in the past couple of months," said Christopher Low, chief economist at FTN Financial in New York. "I think we will see an increasingly cautious consumer in the second half."

Against the backdrop of higher mortgage rates, consumers were less upbeat about housing in August, the survey showed.

Rising borrowing costs also appear to be making builders cautious about breaking ground on new projects.

Housing starts rose 5.9 percent to a seasonally adjusted annual rate of 896,000 units, the Commerce Department said in a separate report. While that was a recovery from June's decline, it was below economists' forecasts for a 900,000-unit rate.

"I think we are looking at a situation where some air is coming out of the housing recovery given the higher mortgage rates," said Michael Hanson, senior economist with Bank of America Merrill Lynch in New York.

Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Fed will soon start trimming the $85 billion in monthly bond purchases that it has been making to keep borrowing costs low and stimulate the economy.

That in turn has prompted a rise in mortgage rates, which threatens to sap some of the strength from a housing recovery that has been pushing prices higher for more than a year.

Economists expect the U.S. central bank to make an announcement on tapering at its policy meeting next month.

LABOR, SUPPLY CONSTRAINTS

U.S. government bond yields pushed to two-year highs in anticipation of the Fed action, while the dollar rose against a basket of currencies. U.S. stocks were little changed after taking a beating on Thursday.

In July, permits for future home construction jumped 2.7 percent in July to a 943,000-unit pace. The increase was a touch below economists' expectations for a 945,000-unit pace.

Daniel Silver, an economist at JPMorgan in New York, said the July housing starts data made it less likely residential investment would reach the 17-percent annual pace that the investment bank expects for the third quarter.

Hitting that target is one of the assumptions underpinning JPMorgan's 2.5 percent GDP growth estimate for that quarter.

July data on industrial production, residential construction and employment have missed market forecasts. The economy grew at a 1.7 percent pace in the second quarter.

Aside from higher mortgage rates, the residential construction figures last month could also be a reflection of supply constraints. Builders have been complaining about a shortage of labor and materials.

Still, the fundamentals for housing remain favorable. With permits outpacing starts, economists expect residential construction to continue rising and again contribute to economic growth this year.

A report on Thursday showed confidence among single-family homebuilders neared an eight-year high in August, with builders fairly upbeat about sales prospects over the next six months.

"As anecdotal evidence suggests, builders may be holding back on new construction in part to reap the benefits of higher prices," said Guy Berger, an economist at RBS in Stamford, Connecticut.

"Eventually, though, the dynamics at play in the housing market will likely lead builders to boost groundbreaking activity further from its current pace."

Last month, groundbreaking for single-family homes, the largest segment of the market, fell 2.2 percent to the lowest level since November last year. Starts for multi-family homes jumped 26 percent, reversing the prior month's decline.

Permits for multi-family homes rose 12.6 percent, but approvals for single-family homes fell 1.9 percent.

(Reporting by Lucia Mutikani, additional reporting by Richard Leong and Steven C Johnson in New York; Editing by Paul Simao)

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Housing Data Helps Propel Markets

Wall Street closed higher on Tuesday, fueled by new data showing a strengthening housing market in the United States and supportive comments from central banks around the world.

By the end of trading, the Standard & Poor's 500-stock index was 0.6 percent higher, and the Dow Jones industrial average gained 0.7 percent. The Nasdaq composite was 0.9 percent higher.

Markets were bolstered by a report that American home prices rose 1.1 percent in March, according to the Standard & Poor’s Case Schiller index. Analysts were looking for a rise of 1 percent. It was the biggest annual gain in nearly seven years, and a further sign that the strengthening housing recovery is providing a source of support for the economy.

Prices in the 20 cities jumped 10.9 percent year over year, beating expectations for 10.2 percent. It was the biggest increase since April 2006, just before prices peaked in the summer of that year.

Further encouraging the market, data showed consumer confidence was the strongest in over five years in May.

Both the Bank of Japan and the European Central Bank reaffirmed that their policies would remain in place. On Monday, when United States markets were closed for the Memorial Day holiday, an executive board member of the European Central Bank, Joerg Asmussen, said the policy would stay as long as necessary. On Tuesday, a Bank of Japan board member, Ryuzo Miyao, said it was vital to keep long- and short-term interest rates stable.

Monetary stimulus from central banks has been a major contributor to Wall Street’s gains this year, lifting the S.&P. 500 more than 15 percent. Analysts have also cited earnings growth and relatively cheap valuations as reasons investors have used any market decline as a buying opportunity, helping lift both the S.&P. and Dow to a series of new highs. Last week, major American indexes posted their first negative week since mid-April on lingering concerns that the Federal Reserve may scale back its stimulus measures sooner than expected.

“Whenever the Fed starts slowing its stimulus, that will have an impact on markets, but there’s enough strength out of retail and housing that we can sustain our gains, especially with Japan making it very clear what its policy will be,” said Tad Hill, chief executive of Freedom Financial Group in Birmingham, Ala.

Cyclical sectors, which are closely tied to the pace of economic growth, are likely to advance on any sign of continued supportive policies. Bank of America rose 0.8 percent while Citigroup was 2.5 percent higher.

Luxury retailer Tiffany & Company on Tuesday reported adjusted earnings and sales that beat expectations, sending shares up 4 percent.

Abercrombie & Fitch late Friday reported a drop in first-quarter same-store sales that was steeper than expected and cut its full-year profit view. Its shares fell 1.8 percent.

Economic View: Housing Market’s Future Has Many Variables

Economic and demographic changes may severely impair the value of a home when it’s time to sell, a decade or more in the future. Will a particular home still be fashionable then? Will social and economic shifts tilt demand toward new designs and types of communities —even toward renting rather than an outright purchase? Any of these factors could affect home prices substantially.

An ever-changing economy requires constant geographical repositioning. In the 19th century, for example, housing was often built near factories and warehouses, with apartments or houses containing numerous small rooms intended to accommodate many people per structure. In those days, before air-conditioning, these buildings often had large porches for access to cooling breezes.

Early in the 20th century, many houses were built around streetcar routes. Then, when the Interstate Highway System started in the 1950s, suburbs bloomed along the path of superhighways. With cheaper cars and relatively cheap gasoline (despite spikes in the 1970s and after 2005), housing developments became more dispersed. A culture that prized privacy and individuality left many neighborhoods without sidewalks or nearby community gathering places. Houses were cheaper to build this way, and they grew larger.

In the last century, shifts like these helped explain why inflation-corrected prices for existing homes typically changed by plus or minus 15 percent in a decade, even without national bubbles.

Further changes are inevitable, but hard to predict. For example, governments may now be reluctant to spend much on infrastructure like new highways or high-speed rail. But what will happen in 10 years — and what are the possible effects for the housing market?

We live in what’s been called an ideas economy, with a shrinking industrial base and a greater premium on knowledge and personal connections, which make social, educational and business networking ever more important. New social media haven’t reduced the importance of geographical neighborhoods.

In his 2009 book, “The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity,” Richard Florida argues that the modern economy requires a different layout: “The coming decades will likely see more intense clustering of jobs, innovation and productivity in a smaller number of bigger cities and city-regions,” he writes. That outcome would certainly affect prices of existing homes. It seems a plausible direction for housing development, but it’s certainly not guaranteed.

AT the moment, walkable urban areas — pleasant places where people can stroll to work and to restaurants — are becoming more popular. Last year, a Brookings Institution study of the Washington area by Christopher B. Leinberger and Mariela Alfonzo concluded that such neighborhoods, where creative people cluster, show the highest property values. Far-flung suburbs are losing value relative to cities and close-in suburbs that offer such walkable areas. And these denser places seem to fit in better with more environmentally conscious values, too.

Attitudes toward renting have also been changing. A MacArthur Foundation survey, conducted by Hart Research Associates in February and March, asked Americans if they thought that, “given our nation’s current situation,” buying a home had become more or less appealing. Fifty-seven percent said it had become less so, with only 27 percent saying it had become more appealing. When asked if they agreed with the statement, “For the most part, renters can be just as successful as owners at achieving the American dream,” some 61 percent agreed; 28 percent did not.

Perhaps that trend will continue. Renting, which connotes mobility, might come to be identified with a high-status lifestyle in the new economy. If renting does become more important, owners of existing housing will be affected unevenly. A 2011 study from the Department of Housing and Urban Development concluded that conversion from ownership to rental properties has often been difficult: It has been more common for some townhouses and other “attached” homes that are relatively small and old and located in central cities. Much of the owner-occupied housing stock of today doesn’t fit that bill.

There is another problem. It’s not just that many houses today don’t convert easily to rental property. In addition, they haven’t been designed to foster their use as components of continuing-care retirement communities. Yet, as baby boomers retire, the demand for such places will probably grow at the expense of conventional housing.

In the wake of the housing crisis, and amid shifting demographics, it’s plausible that a broad change in thinking is ahead, reducing demand for large suburban homes. After all, the national psyche has absorbed the tribulations of the millions of people who have been living in homes worth less than their mortgages, struggling to make payments and yet unable to sell. Smaller living quarters may become more socially acceptable.

This future for housing is possible, but we don’t really know. The housing haze is very thick, and, as I’ve said in other columns, so many things affect home prices that it is hard to foresee prices for a particular home years from now.

Forecasting is indeed risky, because of factors like construction productivity, inflation, and the growth and bursting of speculative bubbles in both home prices and long-term interest rates. The outlook is so ambiguous that there is no single answer to the question of housing’s potential as a long-term investment.

If you want to settle down for a quiet life and watch your children grow up in a nice neighborhood, you might well act now to lock in an ultralow mortgage rate. Then again, if you’re restless, ambitious and determined to be mobile, it might be sensible to rent rather than own. Calculating the best economic return may not even be possible, given the uncertain investment potential.

Instead, it may be wisest to choose the housing that best meets your personal needs, among the choices you can afford.

Robert J. Shiller is Sterling Professor of Economics at Yale.

Off the Charts: Housing, Ailing for Years, Starts to Recuperate

The housing industry made no contribution at all.

Now it appears that industry is finally starting to recover. Housing starts are rising at a rapid rate, albeit from a very low level. And last year, residential construction spending, adjusted for inflation, climbed 12 percent, after declining for a record six consecutive years.

The Census Bureau reported this week that single-family housing starts rose to a seasonally adjusted annual rate of 618,000 in February, the highest level since June 2008, months before the collapse of Lehman Brothers turned a recession into a global credit crisis.

Over the last 12 months, 551,000 single-family units were started, and an additional 255,000 multifamily units. As is shown in the accompanying charts, that was an increase of 28 percent from the period a year earlier. Not since the early 1980s, when the economy was coming out of a double-dip recession caused in large part by soaring interest rates that made homes unaffordable, had starts risen so rapidly.

But as can also be seen from the charts, the recovery has not propelled the housing industry far. The total level of starts is still lower than at any time before the recession, and in the fourth quarter of last year, the residential construction industry accounted for only 2.6 percent of the total gross domestic product. That figure was up from the low, reached in mid-2009, of just 2.2 percent, but it was far below the 6.3 percent reached in late 2005, when the housing bubble was at its peak.

The last time housing construction contributed so little to the economy was during World War II.

In normal economic recoveries, housing construction supplies a substantial part of the growth recorded in the first year or two after the recession ends. But in this recovery, it kept shrinking. Over all, real housing spending contracted in every year from 2006 to 2011. But the 12 percent gain last year was the fastest since 1993, another period of recovery.

The building industry, devastated by the collapse of the boom, is only starting to recover. The number of new homes offered for sale peaked at 570,000 in mid-2006, as the boom was ending, and many of the homes built then took years to sell. The latest figures show that only 150,000 new homes were offered for sale in January, including houses that are planned as well as those partly or completely built. That is up only a little from the low of 142,000 reached last summer.

The number of homes being offered before construction begins has remained close to level for two years at a little more than a quarter of the peak. That is a sign that few new communities have been started, despite the rise in housing starts.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Housing Starts Rose in February

WASHINGTON — American builders started more houses and apartments in February than a month earlier, the Commerce Department reported on Tuesday, pointing to a housing recovery that was gaining strength.

The government said builders broke ground on homes at a seasonally adjusted annual rate of 917,000, an increase from 910,000 starts in January. February’s performance was the second-fastest pace since June 2008, behind December’s pace of 982,000.

Single-family home construction increased to an annual rate of 618,000, the strongest level in four and a half years. Apartment construction also ticked up, to 285,000.

The gains are likely to grow even faster in the coming months. Building permits, a sign of future construction, increased 4.6 percent, to 946,000, last month. That was also the most since June 2008, just a few months into the Great Recession.

The American housing market is recovering after stagnating for roughly five years. Steady job gains and near-record-low mortgage rates have encouraged more people to buy.

Still, the supply of available homes for sale remains low. That has helped push up home prices, which rose nearly 10 percent in January compared with the period a year earlier, according to CoreLogic. The price gain was the biggest increase in nearly seven years.

The number of previously occupied homes for sale has fallen to its lowest level in 13 years. And the pace of foreclosures, while still rising in some states, has slowed sharply on a national basis. That means fewer low-priced foreclosed homes are being dumped on the market.

Those trends, and the likelihood of further price gains, have led builders to step up construction. Last year, builders broke ground on the most homes in four years.

Homebuilders have become much more confident in the last year. But in March, a measure of homebuilder confidence fell for the second consecutive month over concerns that demand for new homes was exceeding supplies of land, building materials and workers. In the short term, that could slow sales.

But the survey noted that the outlook for sales over the next six months rose to its highest level in more than six years.

Though new homes represent only a fraction of the housing market, they have an outsize effect on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the homebuilders.

DealBook: China’s Push to Cool Down Housing Raises Questions

Kim Kyung-Hoon/ReutersA man looks around a miniature of new apartment complex at a showroom in Beijing.

Chinese shares fell the most in two years on Monday as the Shanghai stock exchange’s property index tumbled 9.25 percent. Late on Friday, China’s State Council had announced a new set of policies designed to cool down the housing market.

Economic data released in the last few days has called into question the strength of China’s recovery. It may be that Beijing is so confident in the health of the economy that it can afford to squeeze the real estate sector harder. Or it may be that the government is so concerned about the social implications of a resurgent property market and the effect that real estate may have on the effort to rebalance the economy toward consumption from investment, that it is willing to take that risk.

The new rules include a 20 percent tax on gains from a sale, higher down payments and mortgage rates, and requirements that cities set annual price easing targets. The announcement was met with both skepticism and criticism.

This latest round of real estate controls is the ninth in the last 10 years, yet prices have increased markedly, and some on the Internet questioned the legality of levying taxes through administrative means and called for much more transparency and accountability in how the government might spend the proceeds.

Clearly investors are spooked, though as Yao Wei, chief economist at Societe Generale CIB wrote, according to Reuters:

“The actual impact of the new policy can be very severe or not severe at all, depending on implementation. But the wording is unexpectedly harsh. … In three months time, the impact may not be big at all. But it has stirred very high negative expectations.”

The announcement on Friday spurred a surge in existing home transactions. Some analysts, and most of the people with whom I have spoken, expect the tax to have the perverse effect of driving up the price of existing homes, as buyers will have to cover most of the tax, and pushing more of the sale into a side contract to hide both the true price and gains from the government.

The real estate market in China is already quite distorted, and these repeated rounds of repressive policies may be just layering on more distortions. But the changes required for a more rational housing market are so difficult that in the near term it is easier to try to manage through administrative fiat.

Christian Hartmann/ReutersZhang Xin, chief executive of Soho China.

In a bit of good timing for CBS, this week’s “60 Minutes” had two segments on Chinese real estate. The first was an interview with the billionaire developer Zhang Xin, chief executive of Soho China. “China’s Real Estate Bubble,” the second segment, examines the phenomenon of “Ghost Cities” that many China bears have highlighted over the last several years, complete with visits to the same empty malls and developments that we have been hearing about for years.

Jonathan Anderson of Emerging Advisors Group is out with a provocative report about those ghost cities. In “Hurray for Ghost Cities,” Mr. Anderson argues that these wasted investments are not really a big deal, adding that it might be better that the money was blown on developments rather than even more excess manufacturing.

Tom Miller is also mostly dismissive of the “Ghost Cities problem” in his excellent new book “China’s Urban Billion.” In one chapter, Mr. Miller writes:

The truth of the matter is that China is not building too many apartments, and a handful of empty urban districts are not evidence of a giant property bubble. Chinese property investment may be inefficient, but it is sustained by a huge, growing and sustainable demand for new housing. …

China’s current modern housing stock, defined as homes with individual bathrooms and kitchens, is around 150 million units. But 200 million migrant workers currently live in dormitories or slum housing. If one believes that the urban poor deserve to live in proper flats, the corollary is that Chinese cities actually have a significant shortage of housing – somewhere in the region of 70 million units. China is not building too many new apartments; it is building too few.

I do not mean to completely dismiss some of the dangerous imbalances that have been building in certain property markets across China. But China is not one real estate market, and taking a binary boom-or-bust view about the “China market” is likely a mistake.

The Financial Times examined the diverging markets last week, writing:

China takes bifurcation to a new extreme. Not only are housing prices in the biggest cities moving in a different direction to those in smaller centers, there is also a glaring discrepancy in the amount of development being undertaken.

The country’s main metropolises – Beijing, Shanghai and Shenzhen, which each have populations of more than 10 million – suffer from chronic shortages of housing for low- to middle-income residents. By contrast, scores of smaller cities with populations of up to 3 million face an increasingly severe oversupply.

This is why a simple description of China’s housing market as a “bubble” misses the point. Does “bubble” refer to the soaring prices in the biggest cities, where only the wealthy can afford homes? Or does it refer to the row upon row of empty apartment blocks in the smaller cities?

One of the crucial questions, for which very smart people offer very different answers, is can bubbles burst in certain areas without bringing down the whole economy?

Regardless of how that question is answered, we should perhaps give China’s leaders some credit for acknowledging potential bubbles and taking steps to rein them in. What might have been different if American policy makers had recognized and tried to manage the risks of a housing bubble in 2005, 2006 or 2007?

Square Feet: Idled City Airports Get a Second Life as Housing

Stapleton’s journey from in-town airport to one of the city’s newest planned residential communities began more than a decade ago when it was replaced by Denver International Airport, which was built 12 miles out of town in the middle of a vast prairie with no residential neighbors to be bothered by its noise. Repurposing a large civilian airfield like Stapleton had not been done before in the United States.

But over the last decade the mixed-use community that has been developed there and one like it in Austin, Tex., are seen as examples of how problematic properties can be successfully converted. And these developments are being closely watched, as growing demand for air travel puts pressure on other urban airports with little space to grow.

“Airport repurposing is a rare event driven by unique local circumstances,” said Chris Oswald, vice president for safety and regulatory affairs for Airports Council International.

In Malmo, Sweden, the Bulltofta Airport built in 1923 was used for commercial passenger service until the 1970s, when Sturup Airport was built and the Bulltofta site was turned into a shopping and entertainment complex. Hong Kong’s downtown Kai Tak, made obsolete in 1998 with the opening of the new Hong Kong International Airport, will soon be turned into a cruise ship port, stadium and residential community.

With the development less than halfway complete at Stapleton, 4,000 residences have already been sold and 13,000 people now call the community home.

The common thread for all these projects, Mr. Oswald said, is the availability of an alternative airport with greater capability. “The availability of such sites is very rare, and the combined political and financial will to make use of them is even rarer,” he said.

The land developers behind the Denver and Austin projects agree. For all the unique problems with turning highly specialized industrial property into a place people can call home, they could not have succeeded without cooperation from a multitude of entities, including politicians, bureaucrats and residents.

“It’s very important to have an alignment with all the interests in the very beginning,” said James Chrisman, senior vice president of Forest City Stapleton Inc. which is in year 12 of its 25-year development in Denver. “Projects go different directions, cities turn over. We’ve worked with three mayors, the economy changes,” he said. “You need a strong foundation of a plan and a vision that everyone is committed to, to survive all those ups and downs that occur.”

Forest City Enterprises agreed to buy nearly 4,700 acres from the city of Denver as the development proceeded. When complete it will include 8,000 single-family homes, 4,000 apartments, 12 million square feet of office and retail space and 1,100 acres of parks. Significantly for the city of Denver, the new community has helped to reverse declining property around Stapleton.

“You have to remember there were planes that were 15-20 feet above the houses,” Mr. Chrisman said during an interview in the developer’s office located not far from the site of the landing area he was describing.

“There was a landing strip on the other side. They were coming right over those houses and landing.”

In giving Stapleton a new purpose, Forest City joins with just a few other real estate companies. When the Robert Mueller Municipal Airport in Austin, Tex., closed in 1999, the California-based Catellus was hired to turn 700 acres of runway, terminal and parking into a similar mixed-use community called Mueller.

U.S. Housing Starts Up 15% in September

WASHINGTON (AP) — U.S. builders started construction on homes in September at the fastest rate since July 2008 and made plans to build even more homes in the coming months. The gains show the housing recovery is strengthening and could help the economy grow.

The Commerce Department said Wednesday that home construction rose 15 percent last month to a seasonally adjusted annual rate of 872,000. Single-family construction rose 11 percent to the fastest rate in four years. Apartment building increased 25.1 percent.

Applications for building permits, a sign of future construction, jumped nearly 12 percent to an annual rate of 894,000, also the highest since July 2008.

"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," said Dan Greenhaus, chief global strategist at BTIG.

The construction rate has increased by more than 38 percent over the past 12 months.

Housing starts are now 82.5 percent above the recession low rate of 478,000 hit in April 2009. That's still well short of the 1.5 million that economists consider healthy and far below the more than 2 million built in 2007 — the peak of the housing boom. But the steady upward trend suggests builders believe the housing rebound is durable.

"This is a good report," said Patrick Newport, U.S. economist at HIS Global Insight. "It is telling us that the housing market is improving and there is no reason to think that this will not continue going forward."

Record-low mortgage rates, stable price increases and a limited supply of previously occupied homes have made newly built homes more attractive to buyers. Builder confidence is at a six-year high, according to a survey released Tuesday by the National Association of Home Builders. And the Federal Reserve's aggressive policies could push long-term interest rates even lower, making home-buying affordable for the foreseeable future.

Newport said housing starts should total 750,000 for the year. He expects starts will climb to 950,000 next year and 1.27 million in 2014. By 2015, he said home construction should reach more than 1.5 million.

He also predicts that housing will add about 0.25 percent to overall economic growth this year. If that forecast proves accurate, it will be the first year that housing has been a positive factor for economic growth in five years.

"The rest of the economy is still struggling but housing is doing better because as the population grows, we need new houses to meet that demand," Newport said.

Sales of new homes were up nearly 28 percent in August compared with the same month last year. Even with the gains, sales remain near depressed levels. Economists say more jobs and better pay are needed to help accelerate sales.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the home builders group.

Construction activity rose in three of the nation's four regions. The biggest increases came in the West and South. Housing starts increased by nearly 20 percent in both regions. Construction of new homes and apartments rose 6.7 percent in the Midwest. Housing starts fell 5.1 percent in the Northeast.

Economix Blog: Housing Prices and Income Inequality

Why is the gap between rich and poor in America yawning ever wider?

The issue is urgent. As my colleague Annie Lowrey writes, there is growing evidence that income inequality impedes economic growth.

And one interesting explanation boils down to the high price of housing.

A recent paper by researchers at Harvard University argues that the prohibitive cost of living in the areas with the greatest economic opportunities has forced low-wage workers to migrate instead to areas with inferior opportunities.

“The best places for low- and high-skilled workers used to be the same places: California, Maryland, New York,” said Peter Ganong, a doctoral student in economics, who wrote the paper with Daniel Shoag, a professor of public policy. “Now low-skilled workers can no longer afford to move to the high-wage places.”

In this account, people aren’t moving to the Sun Belt because they want to live there. They are moving because they can’t afford to live in Boston. And the result isn’t just second-best for them; it also slows the pace of economic growth.

Basically, the economy works best when people can move where their skills are most valued. But for low-skill workers, the high price of housing means the cost of living in those places often exceeds the benefits of working there.

The trends are beautifully illustrated by three time-lapse graphics.

The first shows that average incomes by state converged between 1880 and 1980 as low-skilled workers moved to wealthier states. The second shows the pattern of migration, which has changed significantly over the last 30 years.

The third shows the increase in land-use regulations in rich states.

And here’s the crucial point: It doesn’t have to be this way. High housing prices are the result of public policies that discourage new development. Those policies are generally embraced by the residents of wealthy areas, who benefit, at least in the short term, from restrictions on the supply of new housing. But this paper is one more reason to worry about the long-term economic consequences.

As Housing Market Strengthens, Prices Rise at Lower End

The Standard & Poor’s Case-Shiller index for July showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities. Prices rose 1.6 percent from June, the third month in a row that all 20 cities posted month-over-month gains.

However, in four cities, including New York, prices are still down from a year ago. In New York, prices increased 1.2 percent from June but fell 2.6 percent from July 2011. Atlanta, Chicago and Las Vegas also showed year-over-year declines.

Still, price increases showed up even in the cheapest homes.

Luxury homes never lost as much value as lower-end houses, and their prices have shown more strength in the nascent recovery. But now, the gap between price gains in the higher end of the market and the lower end has narrowed considerably, according to data from Zillow, a real estate Web site that divides homes into three price groups.

“It’s less that the top tier is cooling than that the bottom tier is strengthening,” said Stan Humphries, the chief economist at Zillow. “The bulk of the recovery is due to the changes in the bottom and middle tiers.”

Even in Las Vegas, lower-end homes ticked up in price, which may be good news for sellers but can be a hurdle for buyers. Mark Graham, a youth pastor who has been house-hunting for his family there for months, said buying a home for less than $150,000 can be a challenge.

“Houses are going on the market and within a day have multiple offers already on them,” Mr. Graham said, adding that most of the offers were from investors who don’t need financing. “It’s more or less a heartbreaking market, because you get your heart set on a house, and then someone walks in with cash.”

Not every market is showing improvement on the low end, according to Case-Shiller. Atlanta and Chicago were still lagging, but in places like Boston and San Diego, the bottom third of houses were performing much more strongly.

“The majority of the cities have been more like Boston and San Diego,” said Maureen Maitland, vice president of indexes for S.&P. Dow Jones Indices, which produces the Case-Shiller index.

In Phoenix, which has shown the strongest recovery in house prices of the 20 cities surveyed, the lowest third — homes under $127,000 — showed gains of 33.5 percent between July 2011 and July 2012, while the top tier (above $211,000) posted an 11.5 percent increase in the same period. The price cutoffs for the tiers vary by city.

Prices have been bolstered by a decline in the number of foreclosure sales and strong interest from investors, who are buying up low-priced properties and converting them to rentals.

In another optimistic economic sign, consumer confidence rose in September to its highest level since February, according to a report released Tuesday by the Conference Board, a private group.

  The consumer confidence index hit 70.3 points in September, well above economists’ expectations of 63 and a significant improvement from the upwardly revised level of 61.3 in August.