Journal Article

Taxes, income distribution, and the real estate cycle: why all houses do not appreciate at the same rate

Abstract: Changes in house prices are generally reported on an aggregate basis. This article suggests that within a metropolitan area, high-value and low-value homes appreciate at different rates. Overall, the authors results indicate that appreciation rates are more volatile for high-priced homes than for less expensive homes around the real estate cycle. ; The different rates of price appreciation are partly explained by changes in the user cost of owning a home. Cyclical factors also play a part. Furthermore, the author found that changes in the prices of lowervalue homes have a contemporaneous effect on high-end home prices, while the opposite is not true. His results suggest that in a house-price boom, first-time homebuyers may be in a better position to buy a lowpriced home than the reported, aggregate price index suggests.

Keywords: Housing; Real property;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: New England Economic Review

Publication Date: 1993

Issue: May

Pages: 39-50