Interest Rates and the Spatial Polarization of Housing Markets
Francisco Amaral (),
Name Dohmen (),
Sebastian Kohl () and
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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
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
New Economics Papers: this item is included in nep-ban, nep-geo, nep-ifn and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:212
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