The Iraqi Housing Boom

As U.S. home prices continue to fall (down a record 16.6 percent, according to the latest figures), it’s worth considering that in Baghdad, home prices have nearly doubled since last year.

That’s partly because the city has become much safer since 2007, as sectarian violence has receded in the Iraqi capital. While people are moving back to Baghdad in ever larger numbers, new construction has been slow to get off the ground, further tightening the housing supply.

The northern Iraqi region of Kurdistan, meanwhile, faces the opposite problem — construction of new homes has skyrocketed, outpacing demand. Compounding the problem is the fact that, in the Kurdish town of Erbil, at least, most of the new homes cost between $250,000 to $650,000 — far more than the average Iraqi can afford.

Since there is no mortgage market in Iraq and the vast majority of real estate transactions are conducted fully in cash up front, these houses even cost more than most Americans — or most anyone of any nationality — could afford.

So who buys a luxury home in northern Iraq? Government officials, oil executives, wealthy Kurds from abroad. But the homes are selling slowly, and only time will tell whether the subdivisions of Erbil can avoid the fate of this Seattle subdivision, which the American housing crisis has turned into a ghost town.

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  1. Paul Clapham says:

    Seattle? Skamania County is in south-west Washington on the Columbia River. A heck of a long way from Seattle, even for people who want to buy cheap and don’t mind living far away from work. If anything it’s a Portland subdivision.

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  2. Grant says:

    If only the Bluth Company had been allowed to continue its operations there…

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  3. Mike says:

    I’m with comment #1. That area was where I was raised. The value of the housing market just a few years ago was 100 – 200 K for a house (inching up to 250 – 300). Trying to sell more than just a few homes in Stevenson for 600k is a recipe for disaster, for everyone involved.

    I’m personally glad that the subdivision failed – sucks for the developers, but the locals don’t deserve to get gentrified out like that.

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  4. Quill says:

    Skamania County is about 200 miles away from Seattle by road, it’s as much as suburb of Seattle as Syracuse is a suburb of New York City.

    So, how can this be twisted to mean things in Iraq are actually terrible, so that we can avoid giving any credit to the Bush administration?

    And, do we blame this Iraqi housing bubble on the Community Reinvestment Act or Bush’s tax cuts?

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  5. Jack says:

    This has nothing to do with this post – I am sorry for that. When I saw Freakonomics’ “Ratings” on the front page I thought it would be about the ratings Obama’s 30-minute ad received. And indeed that subject seems highly Freakonomics-worthy. I encourage you to do a post on it, because you would make it incredibly interesting.

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  6. Don the libertarian Democrat says:

    I live in Tacoma, and I don’t even know where this place Stevenson is.

    Anyway, I think that this is like the Bay Area where housing prices are down in S.F. and the hub area, but in outlying areas like the far suburbs and Central Valley, they’re way, way down.

    So, I suppose, it depends on where Erbil fits into this map. Is it a hub, or an outlying area? Baghdad prices might remain pretty high even after a downturn.

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  7. Valpey says:

    Seattle is one of the few places that has been largely immune to the worst of the housing crisis. It is pretty irresponsible to conflate Seattle with Skamania County.

    This was a pretty high-risk long shot at success even without a housing market crash.

    Time will tell; and we should expect to see the establishment of an Iraq mortgage industry with the growth of its banking system.

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  8. steve pesce says:

    Are we actually suggesting that the stabilizing of Iraq is something to feel bad about? While we’re talking about nothing, how about we interject some actual news that NYT refuses to report. The two parties we know are pretty much in agreement on the major issues of the day. They’re for escalating the wars, offshore oil drilling, more nuclear power plants, more illegal wiretapping, and the bailout. But the third party candidates had a debate yesterday, maybe some of you would like the read the excepts C-SPAN choss from the third party presidential debate last night to post on the web.

    “Both major parties are very clever,” Nader said. “They don’t like competition. If they were businesses in the marketplace, they would be indicted for violation of the antitrust laws.”

    The candidates repeatedly veered from the debate’s central theme — “The Economy: Where Do We Go from Here?” — to take swipes at the Democratic and Republican parties and their presidential nominees, Democratic Sen. Barack Obama and Republican Sen. John McCain.

    Barr called Obama and McCain indistinguishable on policy positions. The former Republican congressman from Georgia accused them of practicing “sound-bite politics” and showing “no leadership whatsoever.”

    The trio also voiced concerns about the ills of big government, diminishing civil liberties and what they considered the flawed global economy. Baldwin said the “two major parties will do nothing to thwart or diminish what is currently happening.”

    “I believe with all my heart that our sovereignty and our national independence are hanging by a very precarious thread,” said Baldwin, a talk-show host and founding minister of the Crossroads Baptist Church in Pensacola, Fla.

    The candidates, cordial among themselves, also took aim at corporate greed on Wall Street and agreed that President Bush and Vice President Dick Cheney should face criminal charges for their handling of the economy. They accused the current administration of chronic financial irresponsibility.

    Barr found it curious that the Department of Justice has been absent during the nation’s financial crisis.

    “There have been no prosecutions, not even apparently a significant investigation of what appears to be historic fraud,” Barr said.

    Baldwin, agreed, saying that many of these “Wall Street banksters” have violated the law.

    Nader said the “big problem in politics always is excessive concentration of power and wealth in too few hands. The concentration of power strips the American people in their various roles of deciding anything in public law, unless they are part of the power structure.”

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