Determinants of house price change, 1960--1990

The objective of this research has been to identify important differences in the way house prices react to local economic factors. Decennial census data for metropolitan counties for the period 1960--90 were used with a reduced-form housing price model to analyze the response of house prices to change in local and state economic and demographic factors. The study finds that regional house prices varied significantly in their response to population shifts, employment and income trends, as well as to lagged house price change. The response to factor change in each region was found to have changed significantly across the three decades of the study. The framework of the unified market model was utilized to separate house price change into components representing rent change and change in the user cost of housing capital. Rent and price data from each metropolitan county allowed a regression analysis of each of these components on a wide range of variables. It was found that rent change and user cost change each have unique responses to many of these determinants.