Effects of socioeconomic factors on regional housing prices in the USA

Abstract

Purpose

This paper aims to examine the determinants of socioeconomic factors on housing prices and their differential effects among regions.

Design/methodology/approach

This study employs a hierarchical linear model to analyze the housing and socioeconomic data of 363 metropolitan statistical areas (MSAs) in the USA.

Findings

This study generates four findings. First, the population, the percentage of the elderly in population, violent crime rates, and foreclosure rates produce greater effects on housing prices in the Northeast than those in the West. Second, the population produces a greater effect on housing prices in the Northeast than those in the Midwest. Third, mortgage rates produce less significant effects on housing prices in the Northeast than those in the Midwest. Fourth, the population, the percentage of the elderly in population, and rent-income ratio produce greater effects on housing prices in the Northeast than those in the South.

Research limitations/implications

Based on data collected for 2010, this study analyzes socioeconomic factors on the demand side under the implicit assumption that supply side remains constant. Future research can lift the restriction on fixed supply assumption.

Practical implications

The results can provide information to buyers and sellers about how socioeconomic factors affect housing prices. Moreover, this study also provides useful information for the government to design and implement relevant housing policies.

Originality/value

This is the pioneering study to examine the differential effect of socioeconomic factors on metropolitan housing prices among regions by employing dummy regional variables to detect changes in slope coefficients. These detailed conclusions would enhance the efficiency of transaction in housing markets.

Citation

Lin, W.-S., Tou, J.-C., Lin, S.-Y. and Yeh, M.-Y. (2014), "Effects of socioeconomic factors on regional housing prices in the USA", International Journal of Housing Markets and Analysis, Vol. 7 No. 1, pp. 30-41. https://doi.org/10.1108/IJHMA-11-2012-0056