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Homebuyers’ geographic proximity as a predictor of future housing price growth

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  • Hayoung Kim

Abstract

Considering the prevalent information asymmetry in housing markets, this study demonstrates the predictive power of homebuyers’ geographic proximity on housing prices. At the ZIP‐code level, a 10‐percentage‐point increase in the fraction of local buyers corresponds to a 1.1‐percentage‐point higher housing price growth over the subsequent 2 years. At the individual level, out‐of‐town buyers experience a 0.64‐percentage‐point lower annual return compared to local buyers within a county. These results not only highlight the significant information advantages enjoyed by geographically proximate buyers, but also imply that informationally privileged buyers’ revealed preferences for specific locations could provide informationally disadvantaged buyers with hints about which areas are likely to experience higher housing price growth in the near future.

Suggested Citation

  • Hayoung Kim, 2024. "Homebuyers’ geographic proximity as a predictor of future housing price growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(4), pages 1140-1158, July.
    • Handle: RePEc:bla:reesec:v:52:y:2024:i:4:p:1140-1158
    DOI: 10.1111/1540-6229.12479
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