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Regional Migration and House Price Appreciation

  • David E. Frame

    ()

    (Department of Real Estate Zicklin School of Business, Baruch College/CUNY, New York, NY 10010)

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    Despite both empirical and anecdotal evidence suggesting the importance of common systematic factors determining price appreciation in residential real estate markets, the existing literature focuses almost exclusively on the impact of local variables. This paper presents a theoretical model of an urban housing market allowing for explicit consideration of the role of interregional migration in response to changes in economic opportunities within a system of cities. The model identifies the importance of aggregate income and aggregate population growth in house price appreciation and suggests that housing demand and population growth within regions are jointly determined. Empirical tests of these predictions provide strong support for the model. In particular, changes in per-capita aggregate income are negatively related to both returns to housing and local population growth and omitting this systematic component from empirical specifications leads to an underestimation of the impact of local income. Furthermore, there is significant evidence of endogeneity problems in empirical specifications of the model that are similar to those found in the existing literature.

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    File URL: http://www.umac.mo/fba/irer/papers/past/vol11n1_pdf/Article%205.pdf
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    Article provided by Asian Real Estate Society in its journal International Real Estate Review.

    Volume (Year): 11 (2008)
    Issue (Month): 1 ()
    Pages: 96-112

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    Handle: RePEc:ire:issued:v:11:n:01:2008:p:96-112
    Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
    Web page: http://www.asres.org/

    Order Information: Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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