The Week in Review: August 31, 2026
Location, Location, Location
The graphic below compares the change in home prices, adjusted for inflation, for various US cities.
For example, the average USA home price has topped inflation by 238% since 1948.
Why has there been such a wide trajectory in prices, and why have they proven so persistent?
For example, the top 8 cities are on the coasts, while the bottom cities are far from the Atlantic and Pacific. Yet, Philadelphia and Baltimore, a stone’s throw from the Atlantic Ocean, have trailed Boston and New York.
To answer these questions, we need to look at supply, not just demand.
In theory, demand for new housing will bid up the price of existing homes, increasing the incentive for developers to build new houses.
If housing supply is reasonably elastic, which means that new construction is generated in response to a jump in prices, then real housing prices (prices adjusted for inflation) should eventually fall. Over time, price levels should remain reasonably steady.
However, if demand from homebuyers cannot be met, whether due to regulatory obstacles, zoning restrictions, or a limited supply of developable land, upward pressure on prices seems likely as inventory struggles to keep pace with demand.
Let’s review real-life examples. The Philadelphia Federal Reserve noted that steady demand for housing was met with regular growth in housing construction in Atlanta. The same could be said of Houston. Overall prices in both cities have trailed the U.S. average.
Compare that to Los Angeles and New York.
Although prices relative to construction costs began to surge in Los Angeles in the 1970s and New York City in the 1980s, permitting reveals that construction per capita levels barely budged in both cities.
In fact, New York City built more new homes in total in 1927 than in the entire period from 1965 to 1987.
But if we examine the industrial heartland through the eyes of Philadelphia, we see a different picture.
The relative stability in Philadelphia means that existing housing supply after World War II was sufficient to meet future demand, according to the Philadelphia Federal Reserve. Prices remained relatively stable versus inflation without a major boom in construction.
Could construction costs be playing a role? Not necessarily.
In some markets, housing prices are much higher than construction costs. This has led some researchers to conclude that regulatory hurdles to new construction, including zoning and permitting constraints, may have artificially inflated prices.
In conclusion, it appears that today's prices and availability have been largely shaped by yesterday's policies and construction decisions. Housing demand varies over time, but some cities have been more responsive to new demand than others.
Market summary
TWO FOR THE ROAD
More than half of American workers now use AI on the job, up from just 27% two years ago. That's basically double in two years… and for the first time ever, adoption has crossed the halfway mark. The most common use isn't anything fancy either... it's just drafting, revising, and finding information faster. U.S. News & World Report, July 21, 2026
Turns out AI spending in corporate America is not exactly evenly distributed. The top 1% of U.S. businesses spent a median of $7,400 per employee on AI in July alone… more than 600 times what the typical company spent. The next tier down, the top 10%, spent about $650. Everyone else? Roughly $12. PYMNTS, August 17, 2026
I hope you have a great week!
Warmest Regards,
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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