Revisiting metropolitan house price-income relationships

Elias Oikarinen, Steven Bourassa, Martin Hoesli and Janne Engblom
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Janne Engblom: University of Turku - Turku School of Economics

No 21-32, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We explore long-term patterns of the house price-income relationship across the 70 largest U.S. metropolitan areas. In line with a standard spatial equilibrium model, our empirical findings indicate that house price-income ratios are typically not stable even over the long run. In contrast, panel regression models that relate house prices to aggregate personal income and allow for regional heterogeneity yield stationary long-term relationships in most areas. The relationship between house prices and income varies significantly across locations, underscoring the importance of using estimation techniques that allow for spatial heterogeneity. The substantial differences across metropolitan areas are closely related to the price elasticity of housing supply.

Keywords: House prices; Personal income; Spatial equilibrium; Regional heterogeneity; Supply elasticity (search for similar items in EconPapers)
JEL-codes: C33 R10 R31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-04
New Economics Papers: this item is included in nep-geo and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2132

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