Housing
What $14 Cocktails Say About Neighborhood Housing Prices
Retail prices rise as a direct result of surges in home prices—the same reasons that bar prices do: Wealthier people don't mind.
Call it the $14 Cocktail Rule. D.C.'s Washington City Paper has made that figure shorthand for describing rising demand for services in the city's hotter neighborhoods. That this measure is indexed to the price of cocktails tells you something about the local alt-weekly, but also about the elasticity of demand for alcohol.
As it turns out, the relationship between rising housing prices and rising everything-else prices is broader than just what's happening at the bar. A new paper released by the National Bureau of Economic Research susses out the causal link between rising demand for housing and retail prices. In neighborhoods with large house-price movements, retail prices rise accordingly.