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The Impact of Labels on Real Asset Valuations

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Abstract

Expectations and sentiment of economic agents about financial prospects are both the drivers and the leading indicators of economic phenomena. This paper shows that neighborhood labels, frequently used in realtors’ property descriptions, have a causal impact on the demand for housing. Results indicate that appraised values, house prices and rents increased in minority neighborhoods upon removal of neighborhood labels. The underlying mechanism likely works through forming expectations about future growth in housing markets, as documented by the decrease in the rent-to-price ratio and lack of change in the creditworthiness of the neighborhood residents.

Suggested Citation

  • Yuliya Demyanyk & Luis Lopez & Nitzan Tzur-Ilan, 2025. "The Impact of Labels on Real Asset Valuations," Working Papers 2504, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:99474
    DOI: 10.24149/wp2504
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    More about this item

    Keywords

    real estate; valuations; house price expectations; housing demand; neighborhood;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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