Uptown Worlds: Directional Bias and House Prices in U.S. Cities

Ferdinand Rauch and Schömann, Simon

No 21713, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Experiments from psychology show that people associate northern locations on arbitrary maps with positive value, raising the possibility that this cognitive bias shapes real housing markets. Using parcel-level data on 1.1 million residential properties across 285 cities in the northeastern United States, we find that houses in the northern parts of cities indeed sell at higher market prices. This premium disappears once lot size is controlled for, the only housing characteristic with this property. We argue that a small psychological preference for northness, too small to register as a direct price premium yet large enough to act as a Schelling focal point, could lead to neighborhood sorting and generate these differences in housing quality between the northern and southern parts of cities.

JEL-codes: R14 R21 R30 (search for similar items in EconPapers)
Date: 2026-07
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