House Prices, Bubbles and City Size
2010-07-15
Research Paper
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We build a theoretical model that relates house price, city size and the expected future growth of demand for housing. Our model combines the Alonso-Mills model on urban economics with insights from financial economics on house prices. Estimating the model for cities in the US, we empirically validate the positive effect of city size on urban house prices. Moreover, our estimations confirm that an (unrealistic) increase in the expected growth of demand fuelled by the widespread availability of credit provides a better explanation for the recent bubble than inelastic housing supply that explained earlier bubbles.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- O32 : Management of Technological Innovation and R&D
- M : Business Administration and Business Economics; Marketing; Accounting
- M13 : New Firms; Startups
Automatically Extracted Terms
- price
- house
- housing
- house prices
- growth
- model
- bubble
- city size
- demand
- economic
- increase
- effect
- future
- house price
- figure
- return
- mortgage
- housing stock
- housing bubble
- house price bubble
