Abstract
Using individual level transaction data and a revised difference-in-differences method with nonparametric smoothing, we study the effect of COVID-19 on house prices. The analyses are performed on the areas of Houston, Santa Clara, Honolulu, Irvine, and Des Moines in the US, which vary in the economic features and the implementation of stay home orders. The results show that only Honolulu experienced noticeable house price declines from the outbreak, suggesting that a heavier reliance on service industries might be correlated with higher vulnerabilities. Santa Clara and Irvine lead the house price increase rates, followed by Des Moines and Houston, indicating that stronger housing market fundamentals, better amenities and less dependence on service industries are associated with more positive house price effects.
Highlights
The outbreak of COVID-19 has resulted in huge damages on the US economy and lead to extensive changes in people’s lives (CNBC 2020)
How do house prices respond to all these changes, whether and how the responses vary across different areas, and what local features might be related to the variations? To answer these questions, we investigate the effect of COVID-19 on house prices for five areas in the US that vary in economic features and the implementation of stay home orders
To compare how the changes of house prices relate to the stay home orders, we include the start of the stay home order, the first reopening of the economy and the reverse of the reopening as three vertical lines colored purple for each of the five areas
Summary
The outbreak of COVID-19 has resulted in huge damages on the US economy and lead to extensive changes in people’s lives (CNBC 2020). The outbreak triggered a series of events, including interest rate cuts (CNN 2020), the implementation of stay home orders or business shutdowns, forbearance on mortgage payments (CARES Act), fluctuations in stock prices and rising inflation expectations. How do house prices respond to all these changes, whether and how the responses vary across different areas, and what local features might be related to the variations? We investigate the effect of COVID-19 on house prices for five areas in the US that vary in economic features and the implementation of stay home orders. The analyses results could assist the government and the investors in identifying the housing markets that are more vulnerable to shock, as well as those that might be fueled by the low interest rates and inflation expectations
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