Understanding Spatial House Price Dynamics in a Housing Boom

51 Pages Posted: 4 Sep 2024

See all articles by Leo Kaas

Leo Kaas

Goethe University Frankfurt; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Georgi Kocharkov

Deutsche Bundesbank

Nicholas Syrichas

Free University Berlin

Multiple version iconThere are 2 versions of this paper

Date Written: August 07, 2024

Abstract

We examine the evolution of spatial house price dispersion during Germany's recent housing boom. Using a dataset of sales listings, we find that house price dispersion has significantly increased, which is driven entirely by rising price variation across postal codes. We show that both price divergence across labor market regions and widening spatial price variation within these regions are important factors for this trend. We propose and estimate a directed search model of the housing market to understand the driving forces of rising spatial price dispersion, highlighting the role of housing supply, housing demand and frictions in the matching process between buyers and sellers. While both shifts in housing supply and housing demand matter for overall price increases and for regional divergence, we find that variation in housing demand is the primary factor contributing to the widening spatial dispersion within labor market regions.

Keywords: House price dispersion, Spatial housing markets, Search frictions in housing markets

JEL Classification: D83, R21, R31

Suggested Citation

Kaas, Leo and Kocharkov, Georgi and Syrichas, Nicholas, Understanding Spatial House Price Dynamics in a Housing Boom (August 07, 2024). SAFE Working Paper No. 425, Available at SSRN: https://ssrn.com/abstract=4946328 or http://dx.doi.org/10.2139/ssrn.4946328

Leo Kaas (Contact Author)

Goethe University Frankfurt ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, Hesse 60629
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Georgi Kocharkov

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Nicholas Syrichas

Free University Berlin ( email )

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