Superstar Cities

53 Pages Posted: 2 Aug 2006

See all articles by Christopher J. Mayer

Christopher J. Mayer

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Joseph Gyourko

University of Pennsylvania - Real Estate Department; National Bureau of Economic Research (NBER)

Todd M. Sinai

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2006

Abstract

Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. Scarce land leads to a bidding-up of land prices and a sorting of high-income families relatively more into those desirable, unique, low housing construction markets, which we label "superstar cities." Continued growth in the number of high-income families in the U.S. provides support for ever-larger differences in house prices across inelastically supplied locations and income-based spatial sorting. Our empirical work confirms a number of equilibrium relationships implied by the superstar cities framework and shows that it occurs both at the metropolitan area level and at the sub-MSA level, controlling for MSA characteristics.

Keywords: house prices, income inequality, housing supply

JEL Classification: R0, J0, D4, N9

Suggested Citation

Mayer, Christopher J. and Gyourko, Joseph E. and Sinai, Todd M., Superstar Cities (June 16, 2006). Available at SSRN: https://ssrn.com/abstract=921741 or http://dx.doi.org/10.2139/ssrn.921741

Christopher J. Mayer (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Joseph E. Gyourko

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States
215-898-3003 (Phone)
215-573-2220 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Todd M. Sinai

University of Pennsylvania - The Wharton School ( email )

1465 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States
215-898-5390 (Phone)
215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~sinai

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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