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Superstar Cities

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  • Joseph Gyourko
  • Christopher Mayer
  • Todd Sinai

Abstract

Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. Scarce land leads to a bidding-up of land prices and a sorting of high-income families relatively more into those desirable, unique, low housing construction markets, which we label %u201Csuperstar cities.%u201D Continued growth in the number of high-income families in the U.S. provides support for ever-larger differences in house prices across inelastically supplied locations and income-based spatial sorting. Our empirical work confirms a number of equilibrium relationships implied by the superstar cities framework and shows that it occurs both at the metropolitan area level and at the sub-MSA level, controlling for MSA characteristics.

Suggested Citation

  • Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12355
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    More about this item

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • J0 - Labor and Demographic Economics - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • N9 - Economic History - - Regional and Urban History

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