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Housing Price Dynamics Within a Metropolitan Area

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  • Karl E. Case
  • Christopher J. Mayer

Abstract

This paper analyzes the pattern of cross-sectional house price appreciation in the Boston metropolitan area from 1982 to 1994. The empirical results are consistent with many of the predictions of a standard urban model in which towns have a fixed set of locational attributes and amenities. In particular, the evidence suggests that house prices in towns with a large share of residents working in the manufacturing sector in 1980 grew less quickly in the ensuing years when aggregate manufacturing employment fell. As baby boomers moved into middle age, house values appreciated faster in towns with a larger initial percentage of middle-aged residents. Housing values rose more slowly in towns that allowed additional construction, and values rose faster in towns closer to Boston. Finally, as fewer families had children who attended public schools statewide, the price premium associated with housing in towns with good schools fell. All of these findings support the view that town amenities and public services are not easily replicated or quickly adaptable to shifts in demand, even within a metropolitan area.

Suggested Citation

  • Karl E. Case & Christopher J. Mayer, 1995. "Housing Price Dynamics Within a Metropolitan Area," NBER Working Papers 5182, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5182
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    References listed on IDEAS

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    1. Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
    2. Brueckner, Jan K., 1982. "A test for allocative efficiency in the local public sector," Journal of Public Economics, Elsevier, vol. 19(3), pages 311-331, December.
    3. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-269, June.
    4. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    5. Karl E. Case, 1992. "The Real Estate Cycle and the Economy: Consequences of the Massachusetts Boom of 1984-87," Urban Studies, Urban Studies Journal Limited, vol. 29(2), pages 171-183, April.
    6. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
    7. Barton A. Smith & William P. Tesarek, 1991. "House Prices and Regional Real Estate Cycles: Market Adjustments in Houston," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 396-416.
    8. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-374, December.
    9. Christopher J. Mayer, 1993. "Taxes, income distribution, and the real estate cycle: why all houses do not appreciate at the same rate," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-50.
    10. Karl E. Case & James H. Grant, 1991. "Property Tax Incidence in a Multijurisdictional Neoclassical Model," Public Finance Review, , vol. 19(4), pages 379-392, October.
    11. Karl E. Case & Robert J. Shiller, 1987. "Prices of single-family homes since 1970: new indexes for four cities," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-56.
    12. Donald R. Haurin, 1980. "The Regional Distribution of Population, Migration, and Climate," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 293-308.
    13. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    14. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    15. Karl E. Case & Robert J. Shiller, 1994. "A decade of boom and bust in the prices of single-family homes: Boston and Los Angeles, 1983 to 1993," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 40-51.
    16. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    17. Henry O. Pollakowski & Michael A. Stegman & William Rohe, 1991. "Rates of Return on Housing of Low-and Moderate-Income Owners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 417-425.
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    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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