Full Citation
Title: Why the Most Affordable Homes Increased the Most in Price between 2000 and 2019
Citation Type: Miscellaneous
Publication Year: 2020
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Abstract: This report investigates factors in metropolitan statistical areas (MSAs) associated with higher price appreciation at the low end of the market relative to appreciation at the high end. US home prices have exceeded the 2006 peak, just before the 2008 housing market collapse. Between 2000 and 2019, the house price index has almost doubled, with a larger increase occurring at the low end of the market. Home prices in the lowest 20th percentile have increased 126 percent while prices in the top 20th percentile have increased 86 percent. The relative price appreciation varies substantially across MSAs. For example, in Los Angeles, the appreciation rate of low-tier homes was 133 percentage points higher than for high-tier homes, while the difference was only 18 percentage points in Chicago. We find that in MSAs with higher employment growth, stronger zoning and land-use regulation, and less land available for development, prices for low-tier homes have increased more than for high-tier homes. The investor share and its growth in the home transaction market is not associated with the price growth rate differences between low-tier and high-tier homes. The relatively greater increase in housing costs for low-income households has caused residual income inequality (household income minus housing costs) to increase more than income inequality. Additionally, because MSAs with lower home price growth rates also experienced lower employment growth, housing cost burden and residual income inequality increased at a similar level across most MSAs. This suggests the need for policies to mitigate high housing cost burdens at the local level because the reasons for the increased burden—a weak labor market or stringent housing supply— differ by MSA.
User Submitted?: No
Authors: Choi, Jung Hyun; Walsh, John; Goodman, Laurie
Publisher: Housing Finance Policy Center
Data Collections: IPUMS USA
Topics: Housing and Segregation
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