U.S. metropolitan house price dynamics

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

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Abstract

Using data for 70 U.S. metropolitan areas, this study explores spatial heterogeneity in house price dynamics. We use recent advances in panel econometrics that allow for spatial heterogeneity, cross-sectional dependence, and non-stationary but cointegrated data. We test for spatial differences and analyze the relationship between the price elasticity of housing supply and the
income elasticity of prices, as well as bubble size and duration. The long-term elasticity of house prices with respect to aggregate personal income averages 0.81, but varies considerably across metropolitan areas. The long-term income elasticity generally is greater in the more supplyinelastic metropolitan areas, and we show that bubble size and duration are inversely related to supply elasticity. Also short-term momentum and reversion dynamics show substantial spatial
heterogeneity.
Original languageEnglish
Pages (from-to)54-69
Number of pages16
JournalJournal of Urban Economics
Volume105
Early online date9 Mar 2018
DOIs
Publication statusPublished - May 2018

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Keywords

  • house prices
  • dynamics
  • panel data
  • spatial heterogeneity
  • spatial dependence
  • bubbles

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