The House Price-Vacancy Curve

42 Pages Posted: 14 Dec 2016

See all articles by Oliver Lerbs

Oliver Lerbs

University of Münster

Markus Teske

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Date Written: December 13, 2016

Abstract

Individual sales prices and local vacancy rates in the housing market pose a natural analogy to the wage curve, a popular concept in labor economics that describes how individual wages decrease with higher local unemployment. While housing search and matching models and housing externalities strongly suggest a stable inverse relationship, there is still a lack of convincing empirical research on the sensitivity of house sales to local vacancy variation. Based on more than 10,000 single-family home transactions from the German market, this paper confirms a robust house price-vacancy curve among individual home prices and adjacent residential vacancies. The economic size of the relationship is highly comparable across all four analyzed states: a doubling of the vacancy rate at the municipality level is associated with a 5-8% discount in quality-controlled selling prices. Despite negative price signals, local vacancy distributions tend to persist over long time horizons, leaving room for policy intervention.

Keywords: House prices, Housing vacancy, Hedonic regression, Wage curve

JEL Classification: R23, R31, R58

Suggested Citation

Lerbs, Oliver and Teske, Markus, The House Price-Vacancy Curve (December 13, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-082, Available at SSRN: https://ssrn.com/abstract=2884690 or http://dx.doi.org/10.2139/ssrn.2884690

Oliver Lerbs (Contact Author)

University of Münster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

Markus Teske

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

Postfach 103443
Mannheim, D-68034
Germany

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