On the Relation between Local Amenities and House Price Dynamics

Real Estate Economics (Forthcoming)

52 Pages Posted: 29 Jun 2016

See all articles by Eli Beracha

Eli Beracha

Florida International University

Ben Gilbert

Colorado School of Mines - Division of Economics and Business

Tyler Kjorstad

University of Wyoming

Kiplan S. Womack

UNC Charlotte, Department of Finance, Belk College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 27, 2016

Abstract

This study explores the extent to which local amenities (quality of life and trade-productivity) are related to house price volatility, returns, and risk-adjusted returns across 238 MSAs from 1975 to 2013. We find strong and unambiguous evidence that high amenity areas experience greater price volatility. In regards to returns, high amenity areas experience greater (lower) real returns in appreciating (depreciating) markets. However, high amenity areas experience little to no abnormal risk-adjusted returns, on average. Results from the study are robust to an endogenous treatment of amenities and land supply elasticity within a GMM framework. Overall, we conclude that the desirability of a metropolitan area from the perspective of both homeowners and firms is a significant channel through which land values drive house price dynamics.

Keywords: housing, amenities, volatility, land share, land leverage

JEL Classification: R00, R14, R21, R31

Suggested Citation

Beracha, Eli and Gilbert, Ben and Kjorstad, Tyler and Womack, Kiplan S., On the Relation between Local Amenities and House Price Dynamics (June 27, 2016). Real Estate Economics (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2801415

Eli Beracha

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Ben Gilbert

Colorado School of Mines - Division of Economics and Business ( email )

1500 Illinois Street
Golden, CO 80401
United States

Tyler Kjorstad

University of Wyoming ( email )

Box 3434 University Station
Laramie, WY 82070
United States

Kiplan S. Womack (Contact Author)

UNC Charlotte, Department of Finance, Belk College of Business ( email )

9201 University City Blvd.
Charlotte, NC 28223
United States
704.687.7584 (Phone)

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