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Revisiting metropolitan house price-income relationships

Author

Listed:
  • Elias Oikarinen

    (University of Turku, Department of Economics)

  • Steven C. Bourassa

    (Florida Atlantic University)

  • Martin Hoesli

    (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School)

  • Janne Engblom

    (University of Turku - Turku School of Economics)

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.

Suggested Citation

  • Elias Oikarinen & Steven C. Bourassa & Martin Hoesli & Janne Engblom, 2021. "Revisiting metropolitan house price-income relationships," Swiss Finance Institute Research Paper Series 21-32, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2132
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    More about this item

    Keywords

    House prices; Personal income; Spatial equilibrium; Regional heterogeneity; Supply elasticity;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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