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Interest Rates and the Spatial Polarization of Housing Markets

Francisco Amaral (), Name Dohmen (), Sebastian Kohl () and Moritz Schularick
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Francisco Amaral: Macro Finance Lab, University of Bonn
Name Dohmen: Macro Finance Lab, University of Bonn

No 212, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Rising within-country differences in house values are a much debated trend in the U.S. and internationally. Using new long-run regional data for 15 advanced economies, we first 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 then 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.

Keywords: House prices; regional housing markets; spatial polarization (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 R30 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ban, nep-geo, nep-ifn and nep-ure
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_212_2022.pdf First version, 2022 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:212

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