The Suburban Housing Market: Effects of City and Suburban Employment Growth
Posted: 8 Oct 1996
Date Written: July 1996
Communities in close proximity to areas of growing employment will experience greater upward housing demand shifts from job growth than more distant communities, but the housing market response will depend on the elasticity of supply which is likely to differ across communities. Using a data set of over 88,000 housing sales in suburban Philadelphia, we find that city employment growth has a significant positive effect on suburban house values; this effect is largest for housing closest to the central business district and declines with distance from the CBD. City employment growth has a negative effect on the rate of suburban house construction; the magnitude of the negative effect increases with distance. Suburban employment growth has little aggregate effect on house prices and there is less variation in impact by distance. Suburban growth has a significant impact on construction rates, especially at locations near the urban fringe. With regard to the value of real estate assets, city employment growth has a larger average positive effect on total value, including both price and construction impacts. Suburban homeowners and developers may, however, have divergent interests in the spatial pattern of employment growth since suburban employment growth adds little to the value of homes in older, fully developed communities.The views expressed here are solely those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System.
JEL Classification: R21, R12
Suggested Citation: Suggested Citation