The Composition of Metropolitan Employment and the Correlation of Housing Prices Across Metropolitan Areas
نویسنده
چکیده
The variation in default rates by region is quite substantial. Default rates in the Northcentral states were about five times as large as default rates in the Southeastern states. These differences reflect the credit rate risk associated with the real estate markets in each of the regions, the fortunes of the regional economies, and the loan-tovalue ratios and ages of the mortgages.” Quigley and Van Order (1991), p. 358, italics added “The pattern of covariances in these returns suggests that portfolio risk can be reduced by geographical diversification . . . ” Quigley and Van Order (1991), p. 361 Implicit in this argument is an assumption that the fundamentals that generate returns to housing are not perfectly correlated across space. However, if metropolitan areas are viewed as small open economies, they will share shocks to the prices of common inports and exports—shocks that may spill over to housing markets. This paper demonstrates that the correlation of returns to residential housing between two metropolitan areas is a function not only of their physical proximitiy but also the similarity of their industrial composition. This implies that as local economies evolve so will the covariance of housing returns—suggesting that the benefits derived from diversification are maximized by considering the industry risk inherent in the current metropolitan areas, not just the correlation of past returns. ∗I would like to thank Michael Ash, Dirk Early, John Quigley, Chad Slawner, and the participants at the 1999 International Meetings of the American Real Estate and Urban Economics Association for helpful comments.
منابع مشابه
Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks
The correlation between stock and housing prices, which is critical for household asset allocations, varies widely by metropolitan area and country. A general equilibrium model demonstrates that an aggregate positive technology shock increases stock prices and housing demand but can decrease housing prices where land supply is elastic because stable future rents are discounted at higher interes...
متن کاملA New Approach to Estimating Hedonic Equilibrium Models for Metropolitan Housing Markets∗
We formulate and estimate an equilibrium model of metropolitan housing markets with housing differentiated by quality. Quality is a latent variable that captures all features of a dwelling and its environment. Two applications illustrate the value of our new technique. First, we develop a semi-parametric approach to estimate the model for Chicago and New York, obtaining housing prices for each ...
متن کاملAssessment of Housing Characteristics in Ibeju-lekki, Lagos Peri-Urban Settlements
Housing developments in Lagos State peri-urban settlements have contributed immensely to the alleviation of the challenges of housing deficits in central Lagos. This research aims at examining the characteristics of housing development in the peri-urban settlements of Lagos State, Nigeria. Using a case study approach, housing developments in peri-urban settlements in Ibeju-Lekki Local Governmen...
متن کاملApplication of Hazard Based Model for Housing Location Based on Travel Distance to Work
Residential location choice modeling is one of the areas in transportation planning that attempts to examine households location search behavior incorporating their trade-offs between housing quality, prices or rents, distance to work and other key factors. This brings up the need to come up with methods to logically allocate credible choice alternatives for individuals.This article attempts to...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2001