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Interest Rates and the Spatial Polarization of Housing Markets

Francisco Amaral, Martin Dohmen, Sebastian Kohl and Moritz Schularick

American Economic Review: Insights, 2024, vol. 6, issue 1, 89-104

Abstract: Rising within-country differences in house values are a much-debated trend in the United States and internationally. Using new long-run regional data for 15 advanced economies, we show that standard explanations linking growing price dispersion to rent dispersion are contradicted by an important stylized fact: rent dispersion has increased far less than price dispersion. We propose a new explanation: a uniform decline in real risk-free interest rates can have heterogeneous spatial effects on house values. Falling real safe rates disproportionately push up prices in large agglomerations where initial rent-price ratios are low, leading to housing market polarization on the national level.

JEL-codes: E43 R21 R31 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Interest rates and the spatial polarization of housing markets (2023) Downloads
Working Paper: Interest Rates and the Spatial Polarization of Housing Markets (2022) Downloads
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DOI: 10.1257/aeri.20220367

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