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

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  • Christopher J. Mayer

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.

Suggested Citation

  • Christopher J. Mayer, 1993. "Taxes, income distribution, and the real estate cycle: why all houses do not appreciate at the same rate," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-50.
    • Handle: RePEc:fip:fedbne:y:1993:i:may:p:39-50
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    References listed on IDEAS

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    Keywords

    Housing; Real property;

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