IDEAS home Printed from https://ideas.repec.org/p/arz/wpaper/eres2013_34.html
   My bibliography  Save this paper

Veblen Effect in the United States Housing Market: Spatial and Temporal Variation

Author

Listed:
  • Kwan Ok Lee
  • Masaki Mori

Abstract

The finance literature suggests that the Veblen effect (i.e. luxury consumption behavior) could be translated into consumers' behavior with other goods and assets. This study is the first to examine the role that the Veblen effect plays in housing market dynamics, with a focus on spatial and temporal variation in this role. It uses a unique dataset that matches the consumers' appetite for non-housing luxury goods from Google Insights for Search to the premium that they pay for high-end houses in US Metropolitan Statistical Areas (MSAs) during 2004-2011. The results demonstrate that controlling for other MSA demographic and economic characteristics, the Veblen effect has a significant, positive relationship with a premium paid in the housing market. This suggests that high-end houses may have been purchased for the enjoyment of signaling wealth and status and this housing consumption behavior may have partly driven the large deviation of high-end house prices from the median. Housing consumption tends to be motivated more by the Veblen effect in the areas where people pay a steady, higher premium than in other areas with a more volatile, lower premium. In fact, the higher Veblen effect substantially contributes to maintaining the higher level of the premium in these areas even during the bust period.

Suggested Citation

  • Kwan Ok Lee & Masaki Mori, 2013. "Veblen Effect in the United States Housing Market: Spatial and Temporal Variation," ERES eres2013_34, European Real Estate Society (ERES).
  • Handle: RePEc:arz:wpaper:eres2013_34
    as

    Download full text from publisher

    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2013-34
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arz:wpaper:eres2013_34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Architexturez Imprints (email available below). General contact details of provider: https://edirc.repec.org/data/eressea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.