Spatial Effects and House Price Dynamics in the U.S.A.

This paper examines spatial effects in house price dynamics. Using panel data from 363 US Metropolitan Statistical Areas for 1996 to 2013, we find that there are spatial diffusion patterns in the growth rates of urban house prices. Lagged price changes of neighboring areas show greater effects after the 2007-2008 housing crash than over the sample period of 1996-2013. In general, the findings are robust to controlling for potential endogeneity, and for various spatial weights specifications (including contiguity weights and migration flows.) These results underscore the importance of considering spatial spillovers in MSA-level studies of housing price growth.