Chapter

Dispersion in House Price and Income Growth across Markets

Edited by Joseph Gyourko, Christopher Mayer and Todd Sinai

in Agglomeration Economics

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226297897
Published online February 2013 | e-ISBN: 9780226297927 | DOI: http://dx.doi.org/10.7208/chicago/9780226297927.003.0003
Dispersion in House Price and Income Growth across Markets

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The growing dispersion in house price and income growth rates across metropolitan statistical areas is one of the most important stylized facts about metropolitan areas in America. This chapter sheds light on the basic facts about the spatial distribution of house prices and incomes. One possibility is that the value of agglomeration is rising in some inelastically supplied cities. Another is that these cities simply have become more productive, but not due to agglomeration. A third possibility is that the level of amenities in these cities has grown. The fourth explanation is that the dispersion in house price growth arises from an increasing number of high-income families at the national level, combined with households sorting across metropolitan areas. The chapter presents a spatial equilibrium structure to decompose the patterns of income, population, and housing unit growth, to show how superstar cities differ from other cities in regard to growth in their amenities, productivity, and housing supply. This framework implies that superstar cities have much lower housing supply growth than other cities. This review concludes that it is unlikely that growth in urban amenities, urban productivity, or agglomeration benefits are the sole causal forces involved.

Keywords: house price; income growth; metropolitan statistical areas; urban productivity; equilibrium structure

Chapter.  13471 words.  Illustrated.

Subjects: Microeconomics

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