Urban economic base as a catalyst for movements in real estate prices

N. Edward Coulson, Crocker H. Liu and Sriram V. Villupuram

Regional Science and Urban Economics, 2013, vol. 43, issue 6, 1023-1040

Abstract: We examine the relation between housing prices in an MSA and its urban economic base. We create and employ new forward-looking employment growth indices that measure the urban economic strength of an MSA and find that it accounts for a significant and sizeable portion of the house price movements in that MSA. We argue that the forward looking measure is an indicator of future agglomeration growth for the MSAs. We further partition the urban economic growth into growth by various industries and track the attribution of their growth to housing prices over time. We find that for some MSAs, home prices are driven by the same set of industries over time, whereas for others, home prices are driven by a totally new set of industries in the later quarters, due to the birth of new industries. We also analyze the impact of the diversification of an urban economic base on home price volatility and observe that diversification decreases home price volatility. The result has larger implications for urban policymakers in selecting the appropriate type of industries relative to their existing mix of industries.

Keywords: Urban economics; Labor market; Attribution analysis; Real estate (search for similar items in EconPapers)
JEL-codes: R23 R31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:43:y:2013:i:6:p:1023-1040

DOI: 10.1016/j.regsciurbeco.2013.09.012

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