Revisiting metropolitan house price-income relationships

Elias Oikarinen; Steven C. Bourassa; Martin Hoesli; Janne  Engblom

doi:10.1016/j.jhe.2023.101946

Revisiting metropolitan house price-income relationships

Elias Oikarinen, Steven C. Bourassa, Martin Hoesli, Janne Engblom

Accountancy & Finance, Accountancy

Research output: Contribution to journal › Article › peer-review

Abstract

We explore long-term patterns of the house price-income relationship across the 70 largest U.S. metropolitan areas. In line with a standard spatial equilibrium model, our empirical findings indicate that regional house price-income ratios are typically not stable, even over the long run. In contrast, panel regression models that relate house prices to aggregate personal income and allow for regional heterogeneity yield stationary long-term relationships in most areas. The house price-income relationship varies significantly across locations, underscoring the importance of using estimation techniques that allow for spatial heterogeneity. The substantial regional differences are closely related to the elasticity of housing supply.

Original language	English
Article number	101946
Journal	Journal of Housing Economics
Early online date	23 May 2023
DOIs	https://doi.org/10.1016/j.jhe.2023.101946
Publication status	E-pub ahead of print - 23 May 2023

Keywords

house prices
personal income
Spatial equilibrium
regional heterogeneity
supply elasticity

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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@article{e92687a0e8104cf1ace5dbb08485153b,

title = "Revisiting metropolitan house price-income relationships",

abstract = "We explore long-term patterns of the house price-income relationship across the 70 largest U.S. metropolitan areas. In line with a standard spatial equilibrium model, our empirical findings indicate that regional house price-income ratios are typically not stable, even over the long run. In contrast, panel regression models that relate house prices to aggregate personal income and allow for regional heterogeneity yield stationary long-term relationships in most areas. The house price-income relationship varies significantly across locations, underscoring the importance of using estimation techniques that allow for spatial heterogeneity. The substantial regional differences are closely related to the elasticity of housing supply.",

keywords = "house prices, personal income, Spatial equilibrium, regional heterogeneity, supply elasticity",

author = "Elias Oikarinen and Bourassa, {Steven C.} and Martin Hoesli and Janne Engblom",

note = "For helpful comments, we thank the editor Jeff Zabel and two anonymous reviewers, as well as Christian Hilber, Simon Lapointe and Oskari V{\"a}h{\"a}maa, and participants at the International AREUEA conference in Amsterdam, ARES conference in San Diego, ERSA conference in Cork, ERES conference in Delft, Annual Meeting of the Finnish Economic Association, and research seminar at the University of Cambridge. We also thank Andrew VanValin for preparing the maps. This work was supported by the Strategic Research Council at the Academy of Finland (first author; decision numbers 352450 and 352451) and the West-Finland Housing Association of Public Utility. ",

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month = may,

day = "23",

doi = "10.1016/j.jhe.2023.101946",

language = "English",

journal = "Journal of Housing Economics",

issn = "1051-1377",

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TY - JOUR

T1 - Revisiting metropolitan house price-income relationships

AU - Oikarinen, Elias

AU - Bourassa, Steven C.

AU - Hoesli, Martin

AU - Engblom, Janne

N1 - For helpful comments, we thank the editor Jeff Zabel and two anonymous reviewers, as well as Christian Hilber, Simon Lapointe and Oskari Vähämaa, and participants at the International AREUEA conference in Amsterdam, ARES conference in San Diego, ERSA conference in Cork, ERES conference in Delft, Annual Meeting of the Finnish Economic Association, and research seminar at the University of Cambridge. We also thank Andrew VanValin for preparing the maps. This work was supported by the Strategic Research Council at the Academy of Finland (first author; decision numbers 352450 and 352451) and the West-Finland Housing Association of Public Utility.

PY - 2023/5/23

Y1 - 2023/5/23

N2 - We explore long-term patterns of the house price-income relationship across the 70 largest U.S. metropolitan areas. In line with a standard spatial equilibrium model, our empirical findings indicate that regional house price-income ratios are typically not stable, even over the long run. In contrast, panel regression models that relate house prices to aggregate personal income and allow for regional heterogeneity yield stationary long-term relationships in most areas. The house price-income relationship varies significantly across locations, underscoring the importance of using estimation techniques that allow for spatial heterogeneity. The substantial regional differences are closely related to the elasticity of housing supply.

AB - We explore long-term patterns of the house price-income relationship across the 70 largest U.S. metropolitan areas. In line with a standard spatial equilibrium model, our empirical findings indicate that regional house price-income ratios are typically not stable, even over the long run. In contrast, panel regression models that relate house prices to aggregate personal income and allow for regional heterogeneity yield stationary long-term relationships in most areas. The house price-income relationship varies significantly across locations, underscoring the importance of using estimation techniques that allow for spatial heterogeneity. The substantial regional differences are closely related to the elasticity of housing supply.

KW - house prices

KW - personal income

KW - Spatial equilibrium

KW - regional heterogeneity

KW - supply elasticity

U2 - 10.1016/j.jhe.2023.101946

DO - 10.1016/j.jhe.2023.101946

M3 - Article

JO - Journal of Housing Economics

JF - Journal of Housing Economics

SN - 1051-1377

M1 - 101946

ER -

Revisiting metropolitan house price-income relationships

Abstract

Keywords

UN SDGs

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