Spatial Effects and House Price Dynamics in the USA

Posted: 11 Aug 2016

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business

Yannis M. Ioannides

Tufts University

Win Thanapisitikul

Tufts University

Date Written: August 7, 2016

Abstract

While an understanding of spatial spillovers and feedbacks in housing markets could provide valuable information for location decisions, little known research has examined this issue for the US Metropolitan Statistical Areas (MSAs). Also, it is unknown whether there can be differences in the spatial effects before and after a major housing “bust”. In this paper we examine spatial effects in house price dynamics. Using panel data from 363 US MSAs for 1996 to 2013, we find that there are significant spatial diffusion patterns in the growth rates of urban house prices. Lagged price changes of neighboring areas show greater effects after the 2007–08 housing crash than over the entire sample period of 1996–2013. In general, the findings are robust to controlling for potential endogeneity, and for various spatial weights specifications (including contiguity weights and migration flows). These results underscore the importance of considering spatial spillovers in MSA-level studies of housing price growth.

Keywords: Housing price dynamics, Spatial effects, Great Recession of 2007–2009, House price interactions across US MSAs, Geographical proximity effects, Migration flows

JEL Classification: R21, R31, C21, C22, C31

Suggested Citation

Cohen, Jeffrey and Ioannides, Yannis M. and Thanapisitikul, Win, Spatial Effects and House Price Dynamics in the USA (August 7, 2016). Journal of Housing Economics, Vol. 31, (2016), Available at SSRN: https://ssrn.com/abstract=2819620

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Yannis M. Ioannides

Tufts University ( email )

Medford, MA 02155
United States

Win Thanapisitikul

Tufts University ( email )

Medford, MA 02155
United States

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