Interest rates and the spatial polarization of housing markets

Francisco Amaral, Martin Dohmen, Sebastian Kohl and Moritz Schularick

No 17780, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 G51 R30 (search for similar items in EconPapers)
Date: 2023-01
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Related works:
Journal Article: Interest Rates and the Spatial Polarization of Housing Markets (2024)
Working Paper: Interest Rates and the Spatial Polarization of Housing Markets (2022)
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