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The Geography Channel of House Price Appreciation

Author

Listed:
  • Howard, Greg

    (University of Illinois at Urbana-Champaign)

  • Liebersohn, Jack

    (Ohio State University (OSU) - Fisher College of Business)

Abstract

We develop a theory whereby increased demand for living in housing-supply-inelastic regions raises aggregate house prices, and we show that this channel contributed significantly to the U.S. house price boom from 2000 to 2006. As an example of our framework, we show that a decline in manufacturing, an industry concentrated in elastic areas, raises national house prices. Our framework also predicts that changes in the price-rent ratio, from interest rates or other changes in the mortgage market, increase relative locational demand for high-rent areas, which are typically inelastic. Changes in locational demand therefore fill in a missing link between changes in aggregate credit conditions and aggregate house prices. We show evidence of this in the data.

Suggested Citation

  • Howard, Greg & Liebersohn, Jack, 2018. "The Geography Channel of House Price Appreciation," Working Paper Series 2018-17, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2018-17
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    Cited by:

    1. Elaine Drayton & Peter Levell & David Sturrock, 2024. "The determinants of local housing supply in England," IFS Working Papers W24/35, Institute for Fiscal Studies.
    2. Agarwal, Sumit & Deng, Yongheng & Li, Teng, 2019. "Environmental regulation as a double-edged sword for housing markets: Evidence from the NOx Budget Trading Program," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 286-309.
    3. E. V. Antonov & N. K. Kurichev & A. I. Treivish, 2022. "Shrinking Urban System of the Largest Country: Research Progress and Unsolved Issues," Regional Research of Russia, Springer, vol. 12(1), pages 20-35, March.
    4. Manfred M. Fischer & Florian Huber & Michael Pfarrhofer & Petra Staufer‐Steinnocher, 2021. "The Dynamic Impact of Monetary Policy on Regional Housing Prices in the United States," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1039-1068, December.
    5. Parkhomenko, Andrii, 2023. "Local causes and aggregate implications of land use regulation," Journal of Urban Economics, Elsevier, vol. 138(C).
    6. Howard, Greg & Liebersohn, Jack & Ozimek, Adam, 2023. "The short- and long-run effects of remote work on U.S. housing markets," Journal of Financial Economics, Elsevier, vol. 150(1), pages 166-184.
    7. Molloy, Raven & Nathanson, Charles G. & Paciorek, Andrew, 2022. "Housing supply and affordability: Evidence from rents, housing consumption and household location," Journal of Urban Economics, Elsevier, vol. 129(C).
    8. Luis Lopez & Nitzan Tzur-Ilan, 2025. "Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plumes," Working Papers 2502, Federal Reserve Bank of Dallas.
    9. Greg Howard & Carl Liebersohn, 2019. "What Explains U.S. House Prices? Regional Income Divergence," 2019 Meeting Papers 1054, Society for Economic Dynamics.
    10. Isaiah Hull & Conny Olovsson & Karl Walentin & Andreas Westermark, 2022. "Manufacturing Decline and House Price Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 264-281, July.
    11. Anthony Yezer, 2024. "Planning Regulations: Does Land Use Regulation Lower the Average Price of Housing in Cities?," Working Papers 2024-03, The George Washington University, Institute for International Economic Policy.
    12. Nikolay Kurichev & Ekaterina Kuricheva, 2020. "Interregional migration, the housing market, and a spatial shift in the metro area: Interrelationships in the case study of Moscow," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(4), pages 689-703, August.
    13. Ariel Binder & Max Risch & John Voorheis, 2025. "Housing Capital and Intergenerational Mobility in the United States," Working Papers 25-55, Center for Economic Studies, U.S. Census Bureau.
    14. Dias, Daniel A. & Duarte, João B., 2015. "Monetary Policy and Homeownership: Empirical Evidence, Theory, and Policy Implications," MPRA Paper 112252, University Library of Munich, Germany, revised 05 Mar 2021.
    15. Greg Howard & Jack Liebersohn, 2023. "Regional Divergence and House Prices," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 312-350, July.
    16. Schuyler Louie & John A. Mondragon & Johannes Wieland, 2025. "Supply Constraints do not Explain House Price and Quantity Growth Across U.S. Cities," NBER Working Papers 33576, National Bureau of Economic Research, Inc.
    17. Buchholz, Maximilian & Kemeny, Tom & Randolph, Gregory & Storper, Michael, 2026. "Inequality, not regulation, drives America's housing affordability crisis," SocArXiv 95trz_v1, Center for Open Science.
    18. Elaine Drayton & Peter Levell & David Sturrock, 2025. "The determinants of local housing supply in England," IFS Working Papers W25/04, Institute for Fiscal Studies.
    19. Isil Erol & Umut Unal, 2023. "Local House Price Effects of Internal Migration in Queensland: Australia's Interstate Migration Capital," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(3), pages 308-327, September.
    20. Xiangyu Feng & Nir Jaimovich & Krishna Rao & Stephen J Terry & Nicolas Vincent, 2023. "Location, Location, Location: Manufacturing and House Price Growth," The Economic Journal, Royal Economic Society, vol. 133(653), pages 2055-2067.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • 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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