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Taxes, income distribution, and the real estate cycle: why all houses do not appreciate at the same rate

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  • Christopher J. Mayer

Abstract

Changes in house prices are generally reported on an aggregate basis. This article suggests that within a metropolitan area, high-value and low-value homes appreciate at different rates. Overall, the author’s results indicate that appreciation rates are more volatile for high-priced homes than for less expensive homes around the real estate cycle. ; The different rates of price appreciation are partly explained by changes in the user cost of owning a home. Cyclical factors also play a part. Furthermore, the author found that changes in the prices of lowervalue homes have a contemporaneous effect on high-end home prices, while the opposite is not true. His results suggest that in a house-price boom, first-time homebuyers may be in a better position to buy a lowpriced home than the reported, aggregate price index suggests.

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File URL: http://www.bostonfed.org/economic/neer/neer1993/neer393c.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1993)
Issue (Month): May ()
Pages: 39-50

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Handle: RePEc:fip:fedbne:y:1993:i:may:p:39-50

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Keywords: Housing ; Real property;

References

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  1. Richard Meese & Nancy Wallace, 1991. "Nonparametric Estimation of Dynamic Hedonic Price Models and the Construction of Residential Housing Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 308-332.
  2. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
  3. Poterba, James M, 1984. "Tax Subsidies to Owner-occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 729-52, November.
  4. J. Allen Seward & Charles J. Delaney & Marc T. Smith, 1992. "An Empirical Analysis of Housing Price Appreciation in a Market Stratified by Size and Value of the Housing Stock," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 195-206.
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  6. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-74, December.
  7. Barton A. Smith & William P. Tesarek, 1991. "House Prices and Regional Real Estate Cycles: Market Adjustments in Houston," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 396-416.
  8. Henry O. Pollakowski & Michael A. Stegman & William Rohe, 1991. "Rates of Return on Housing of Low-and Moderate-Income Owners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 417-425.
  9. Goetzmann, W.N., 1990. "The Accuracy Of Real Estimate Indices: Repeat Sale Estimators," Papers fb-_90-17, Columbia - Graduate School of Business.
  10. Donald R. Haurin & Patric H. Hendershott, 1991. "House Price Indexes: Issues and Results," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 259-269.
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