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Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions

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  • Hwang, Min
  • Quigley, John M.

Abstract

This paper investigates the effects of national and regional economic conditions on housing market outcomes: the prices of owner-occupied housing, vacancies, and residential construction activity. Our three-equation model confirms the importance of changes in regional economic conditions, income and employment on local housing markets. The results provide the first detailed evidence on the importance of vacancies in the owner-occupied housing market in affecting housing prices and supplier activities. The results also document the importance of variations in materials, labor and capital costs and regulation in affecting new supply. Simulation exercises, using standard impulse response models, document the lags in market responses to endogenous shocks and the variations arising from differences in local parameters. The results also suggest the importance of local regulation in affecting the pattern of market responses to regional income shocks.

Suggested Citation

  • Hwang, Min & Quigley, John M., 2006. "Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions," Berkeley Program on Housing and Urban Policy, Working Paper Series qt79d325cm, Berkeley Program on Housing and Urban Policy.
    • Handle: RePEc:cdl:bphupl:qt79d325cm
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    References listed on IDEAS

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    1. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2003. "Why is Manhattan So Expensive? Regulation and the Rise in House Prices," NBER Working Papers 10124, National Bureau of Economic Research, Inc.
    2. Patric H. Hendershott & Bryan D. MacGregor & Raymond Y.C. Tse, 2000. "Estimating the Rental Adjustment Process," NBER Working Papers 7912, National Bureau of Economic Research, Inc.
    3. Baltagi, Badi H., 1981. "Simultaneous equations with error components," Journal of Econometrics, Elsevier, vol. 17(2), pages 189-200, November.
    4. DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
    5. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    6. Cochrane, John H., 1991. "Volatility tests and efficient markets : A review essay," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 463-485, June.
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    Keywords

    Social and Behavioral Sciences;

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