The spatial diffusion of regional housing prices across U.S. states

In this paper I estimate the spatial diffusion of housing prices across U.S. states over a period from 1975 to 2011, showing how long and to what magnitude state-level housing prices are affected by a price shock emanating from surrounding states. I capture the spatial diffusion of regional housing prices with impulse response functions estimated directly from a single equation spatial autoregressive model. In addition, I compare and contrast spatial impulse response estimates over sub-periods. Results show that for the 1975 to 2011 period spatial diffusion of housing prices is statistically significant and persistent across states. This conclusion is robust to whether the model is estimated in levels or in first differences controlling for cointegration. Sub-period estimation, too, suggests the magnitude and persistence of spatial diffusion may be more pronounced after 1999 than before.