Why Has House Price Dispersion Gone Up?

75 Pages Posted: 3 Nov 2008 Last revised: 25 Feb 2009

See all articles by Stijn Van Nieuwerburgh

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); New York University Stern School of Business, Department of Finance

Pierre-Olivier Weill

University of California, Los Angeles; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: February 5, 2009

Abstract

We set up and solve a spatial, dynamic equilibrium model of the housing market based on two main assumptions: households with heterogenous abilities flow in and out metropolitan areas in response to local wage shocks, and the housing supply cannot adjust instantly because of regulatory constraints. In our equilibrium, house prices compensate for cross-sectional productivity differences. We increase productivity dispersion in the calibrated model in order to match the 30-year increase in cross-sectional wage dispersion that we document based on metropolitan-level data. We show that the model quantitatively matches the observed 30-year increase in dispersion of house prices across U.S. metropolitan areas. It is consistent with several other features of the cross-sectional distribution of house prices and wages.

Suggested Citation

Van Nieuwerburgh, Stijn and Weill, Pierre-Olivier, Why Has House Price Dispersion Gone Up? (February 5, 2009). NYU Working Paper No. FIN-06-010. Available at SSRN: https://ssrn.com/abstract=1293642

Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

3022 Broadway
Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

New York University Stern School of Business, Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States

Pierre-Olivier Weill

University of California, Los Angeles ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
378
rank
52,759
Abstract Views
1,886
PlumX Metrics