Local House Prices Research Articles

Clean Electricity, Dirty Electricity: The Effect on Local House Prices

Renewable energy production is one of the most important policy instruments to fight climate change. However, despite global benefits, renewable energy production entails some local challenges, such as requiring more space per unit production capacity. In this paper, we study the external effects of large-scale conventional and renewable electric power generation facilities on local house prices. We combine information of all coal, gas, and biomass plants, as well as all wind turbines in the Netherlands, with 1.5 million housing transactions over a period of 30 years. Using a difference-in-difference as well as a repeated sales model, we study the effects of facility openings and closings. Our results show negative external price effects for gas plants and wind turbines, but positive effects for biomass plants, conditionally upon ex-ante lower priced locations. The external effects of power generating facilities on local housing markets are important to consider, especially with the current focus of public policies on the expansion of renewable energy generation. Our paper is one of the first to present a large-scale study, using detailed information, and comparing several different energy sources in one framework.

Spillover effects from new housing supply

I estimate spillovers from new housing supply on house prices. To estimate these effects, I use exogenous variation in supply induced by a housing subsidy implemented in middle-income neighborhoods in the city of Montevideo, Uruguay. I find evidence of externalities from the new supply on house prices, with prices increasing 12%. I explore two possible mechanisms of these externalities: income and crime rates. Although the evidence suggests a reduction in property crime rates, changes in the neighborhood income mix due to the supply expansion represent an important contributor to the external effects. These findings underline the role of amenities in the determination of local house prices.

Capital Spillover, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restrictions

Abstract We use a unique quasi-experiment–spillovers from the imposition of purchase restrictions on local housing to nearby unregulated cities–to study the effects of out-of-town housing demand on house prices and consumer spending. While these restrictions effectively stymied the surge in local house prices, they induced capital flight and sharp abnormal increases in house prices in nearby unregulated cities. The effect of the house price increases on consumer spending is positive in the aggregate, but echoing Favilukis and Van Nieuwerburgh (2021), is redistributive, that is, negative for renters and positive for homeowners. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Local banks, credit supply, and house prices

I study the effects of an increase in the supply of local mortgage credit on house prices by exploiting a natural experiment from Switzerland. In 2008, retail customers migrate deposits from universal banks that are suffering overseas losses to homogeneous and narrowly-local mortgage banks. Using the distance between the two types of banks as an instrument for deposit growth, I show that local mortgage banks increase mortgage lending, which correlates with subsequent house price growth in their markets. My results highlight that bank specialization plays an important role in the allocation of capital.

Ripple effect of the housing purchase restriction policy and the role of investors' attention

The housing purchase restriction policy (the HPR policy) implemented in China is regarded as one of the strictest. Different from the existing studies on the local impact of the HPR policy, this paper verifies the ripple effect of the HPR policy from adjacent cities. With a monthly panel data of 58 cities in China, this study finds that the HPR policy exerts a significant ripple effect. More adjacent cities implementing the HPR policy will drive up local housing prices, and the attention of investors plays a vital role in this process. By doing so, this paper adds some new insights for the studies on the HPR policy, the ripple effect of housing prices, and the housing market sentiment. Our results also provide some implications for the policy-making process in terms of regional cooperation or coordination.

Spatial heterogeneity in spillover effect of air pollution on housing prices: Evidence from China

This paper analyzes how the spatial spillover effects of air pollution on city-level average housing prices vary with geographical, atmospheric and institutional factors in China. By using the panel data of Chinese major cities over the period 2005–2015, our empirical estimations show that: first, the negative spatial externality of transboundary neighboring air pollution on housing prices is significant only when the distance between cities is less than 200 km, and the impact magnitude significantly declines with distance; second, the spillover effect of air pollution is sensitive to wind direction; third, the negative externality of air pollution on housing prices is significantly aggravated where there is higher ventilation intensity between the cities and lower effectiveness levels relating to local environmental governance. These findings are robust to differing model settings and differing indicators for key variables. Our estimate suggests that, on average, a doubling of the total imported air pollutants from neighboring cities less than 100 km distant will be likely to reduce local housing prices by 6%. The paper concludes with policy suggestions on how to mitigate the negative externality of transboundary air pollution through collaborative cross-boundary urban governance.

House Prices and Misallocation: The Impact of the Collateral Channel on Productivity

This paper empirically investigates the impact of local house price booms on capital misallocation within manufacturing industries. Using the geographic variation provided by the salient Spanish housing boom (2003-2007), we show that manufacturing firms exposed to positive local house price shocks received more credit from banks and their investment grew more intensively when they had a larger proportion of collateralizable real estate assets. We exploit the geographical variation in both house prices and pre-boom urban land supply at municipality level to document that this collateral channel was exacerbated for firms located in urban land-constrained geographical areas where real estate appreciation was larger. The interaction of geographical conditions, that led to heterogeneous housing booms, with the collateral channel on investment resulted in an increasing dispersion of the capital-labor ratio within industries. A simple counterfactual calculation suggests that the misallocation generated by the collateral channel on investment could account for between one-quarter and half of the fall in TFP experienced in the Spanish manufacturing sector over the housing boom.

Research on the Innovation Imbalance Between Coastal and Inland Port Cities Along the Belt and Road: Based on the Three Helix Theory

Port cities will be the important growth poles along the Belt and Road, including coastal and inland ports. But the innovation stimulus driven by the Belt and Road Initiative on the coastal and inland port cities is imbalance. This research takes two groups of Chinese port cities as empirical objects, one has coastal port and the other has inland port, and then establishes a system dynamics model based on the theory of triple helix to analyze port cities’ innovation features. The empirical case shows that the positive stimulation of Belt and Road Initiative to innovation activities of coastal port cities is better than that of inland cities in general. If the decision makers of inland cities want to achieve innovation output like that of developed coastal areas, they need to encourage local universities and research institutes to conduct more market-oriented research on one hand. On the other hand, they need to cooperate with multinational companies; meanwhile, they need to provide more technical resources for local start-ups. In addition, stimulating local house prices and living pressure in a reasonable range can stimulate the innovation enthusiasm of existing R&D personnel, attract top talents to join in, and then drive the innovation output of the whole region.

Local Effects of Global Capital Flows: A China Shock in the U.S. Housing Market

We show that foreign real estate capital inflows have positive real effects and adverse distributional consequences. Using transaction-level data, we document (i) a China shock in the U.S. housing market characterized by surging foreign Chinese housing purchases after 2008; and (ii) home bias in these purchases, as they concentrate in neighborhoods historically populated by ethnic Chinese. Exploiting their temporal and spatial variation, we find that these capital inflows raise local house prices and employment, with the employment effect transmitted through a housing net worth channel. At the same time, they crowd out low-income residents and widen economic inequality across neighborhoods.

Financial Fragility with SAM?

ABSTRACTShared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing.

Dynamic relationships between commodity prices and local housing market: evidence for linear and nonlinear causality

ABSTRACT This research examines the relationship between agricultural commodity prices and the local housing market. Previous literature focuses on the unidirectional impacts from commodity prices to the local economy, but we propose that in some cases local asset markets can also influence commodity prices due to the agglomeration of commodity productions and the linkages of financial markets, and thus the causalities between them can be bilateral. In addition, according to a new regional economic model that we develop about local asset market and commodity price shocks, we further predict the causalities between the commodity prices and the local house price are nonlinear. We test these hypotheses using data of the major agricultural commodities of an agriculturally focused region – California Central Valley area. The results are consistent with our expectations: there is no evidence for linear causalities between the price returns of these agricultural commodities and the local housing market, but the nonlinear Granger causalities between them are significant.

Adaptive Reuse of Religious Heritage and Its Impact on House Prices

Due to social demographic change and secularization, religious heritage sites in Europe are on the verge of losing their original functions. While the adaptive reuse seems to be a proactive strategy to preserve the historical and cultural value embedded in religious heritage sites, little is known concerning its external impact. This paper aims to fill this gap by investigating the external effect of reusing religious heritage on surrounding house prices. Employing both the parametric and non-parametric difference-in-differences hedonic model on a sample of 42 projects of reusing religious heritage and a rich dataset of housing transactions in the Netherlands, we find significant positive externality of reusing religious heritage on local house prices. The external effects are heterogeneous across differentiated project size and monumental status. Larger religious heritage reuse projects and those listed as national monuments exert greater influence on surrounding house prices.

Local house price comovements

AbstractWe study the microlevel evolution of residential house prices using data on repeat sales on Manhattan Island from 2004 to 2015. We document that price comovement, even within a ZIP code, is a highly local and persistent phenomenon. The strength of such comovements vanishes with both spatial and temporal distance. Local underperformance is more persistent than local overperformance, particularly when house prices on aggregate level increase.

Las Cruces housing price fluctuations

Purpose This paper aims to analyze the median price for existing single-family housing units in Las Cruces, New Mexico. The proposed theoretical model accounts for the interplay between supply and demand sides of a metropolitan housing market. Design/methodology/approach This study analyzes the median price for existing single-family housing units in Las Cruces, New Mexico. The proposed theoretical model accounts for the interplay between supply and demand sides of a metropolitan housing market. Explanatory variables used in the analysis are real per capita income, the housing stock, real mortgage rates, real apartment rents and the median real price of single-family units in the USA. Annual frequency data are collected for a 1971–2017 sample period. Parameter estimation is completed using two-stage generalized least squares. Empirical results confirm several, but not all, of the hypotheses associated with the underlying analytical model. In particular, Las Cruces housing prices are found to be reliably correlated with local income and national housing prices. Findings Empirical results confirm several of the hypotheses associated with the underlying analytical model. In particular, Las Cruces housing prices are found to be reliably correlated with local income and national housing prices. Research limitations/implications Results obtained support only a subset of the hypothetical relationships associated with the theoretical model. Additional testing for other small and/or medium sized is required to clarify whether these outcomes are unique to Las Cruces. Practical implications Local income fluctuations and national housing price fluctuations appear to be reliably related to housing price fluctuations for this metropolitan economy. Originality/value Comparatively little housing market research has been conducted for small and medium size urban economies. There is no guarantee that results obtained for large metropolitan housing markets are representative of smaller regional housing markets. The model developed has fairly moderate data requirements and may be applicable to other small and medium size economies such as Las Cruces.

The Ripple Effect and Spatiotemporal Dynamics of Intra-Urban Housing Prices at the Submarket Level in Shanghai, China

The ripple effect of housing price movements between cities has been extensively investigated, but there are relatively few studies on this topic within a metropolitan context, especially at the submarket level. This paper describes the use of ripple effect theory to examine the diffusion process and convergence of intra-urban housing prices at the submarket level in Shanghai, an emerging global city in China. The analysis is based on directed acyclic graphs, local indicators of spatial association time-paths, and a recently developed convergence test. The empirical results of grouping analysis identify 25 submarkets in Shanghai, and the diffusion of housing prices between these submarkets is found to be caused by both geographical and economic proximities. There is also a complex recursive process of price spillovers from high- to low-priced submarkets, and vice versa, which contributes to the spiraling local housing prices. Housing prices diverge across all submarkets, and the whole market can be divided into three convergence clubs. Finally, these convergence clubs have a circular structure with a degree of continuity. This study broadens our knowledge of the price interrelationship among housing submarkets at the intra-urban level. These findings have profound implications for urban planners, policy makers, and local residents.

Capital Flows, Asset Prices, and the Real Economy: A "China Shock" in the U.S. Real Estate Market

We study the effects of foreign real estate capital flows on local asset prices and employment using detailed housing transactions data. We document (i) a "China shock" in the U.S. real estate market after 2007 driven by the Chinese government's house purchase restrictions and (ii) "home bias" in foreign Chinese housing purchases in the United States as they are concentrated in ZIP codes historically populated by ethnic Chinese. Exploiting the quasi-random temporal and spatial variation of real estate capital inflows from China, we find that foreign Chinese housing purchases have a positive and significant effect on local housing and labor markets. A one standard deviation increase in exposure to these purchases explains 24% and 18% of the cross-ZIP-code variation in local house prices and employment, respectively, with the employment effect transmitted through a housing net worth channel. We also show that these purchases drive out lower-income residents. Our results highlight the role of foreign real estate capital flows in both stimulating the real economy and inducing gentrification in local economies.

The Impact of Parental Wealth on College Degree Attainment: Evidence from the Housing Boom and Bust

This study provides new evidence on the impact of parental wealth on college degree attainment. Using geocoded data from the Panel Study of Income Dynamics (1968-2017) linked to local housing price data from the Federal Housing Finance Agency, the empirical strategy analyzes parental housing wealth changes induced by local housing booms of the late 1990s-early 2000s and the subsequent housing bust of the 2007-2009 period. 2SLS/IV estimates show parental wealth significantly increases the likelihood of earning a four-year college degree. Moreover, the combined effects of parental income and wealth are significantly greater than the effects of income alone.

Dream Chasers: The Draw and the Downside of Following House Price Signals

We study labor re-allocation during the 2000s house price boom using detailed career-path data for 32 million workers. We show large flows of workers into realty from virtually all parts of the skill, wage, and education spectrums, especially following instances of strong local house price growth. Those drawn in during the peak ended up in careers paying substantially less than non-entrants that were working in the same occupation and MSA. Comparing within entrants, those in areas with higher non-fundamental house price growth end up in significantly lower-paying occupations. These disparities persist through the end of our sample in 2017.

Does Household Finance Affect the Political Process? Evidence from Voter Turnout During a Housing Crisis

Abstract I examine the effect of house price declines on voter participation using a novel person-level panel data set. Contrary to what the “angry voter hypothesis” predicts, I find that a 10% decline in local house prices decreases the participation rate of the average mortgaged homeowner by 1.6 percentage points. Consistent with a financial distress channel, house price declines have no effects on renters and particularly severe effects on highly leveraged households. My findings are consistent with the existence of a feedback loop between financial distress and inequality operating through voter participation.

Foreign Demand and Local House Prices

We test whether foreign demand matters for local house prices in the US using an identification strategy based on the existence of “home bias abroad” in international real estate markets. Following an extreme political crisis event abroad, a proxy for a strong and exogenous shift in foreign demand, we show that house prices rise disproportionately more in neighbourhoods with a high concentration of population originating from the crisis country. This effect is strong, persistent, and robust to the exclusion of major cities. We also show that areas that were already expensive in the late 1990s have experienced the strongest foreign demand shocks and the biggest drop in affordability between 2000 and 2017. Our findings suggest a non-trivial causal effect of foreign demand shocks on local house prices over the last 20 years, especially in neighbourhoods that were already rather unaffordable for the median household.