Understanding Housing Market Boom During COVID-19: Distributional Effect on Housing Demand Among Income Groups Public

Tang, Yinuo (Spring 2022)

Permanent URL: https://etd.library.emory.edu/concern/etds/pc289k35x?locale=fr
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Abstract

Exploiting ZIP-by-month variation, this paper examines the distributional effect of the COVID-19 pandemic on housing demand across income groups. First, we document heterogeneous demand responses to pandemic shocks. We show a large increase in demand growth rate from high-income ZIP-codes during the first six months of the pandemic. The result holds true after controlling for the housing supply effect, the state-level effect, and the county-level effect. Second, we develop within-group models testing the effects of two speculation channels. We find little evidence that the strong demand response in high-income ZIP-codes is driven by fast-growing housing prices; instead, we estimate that the ultra-low mortgage rates play an important role. With prolonged pre-pandemic and post-pandemic coverage, this paper sheds light on the implications for the evolution of wealth inequality in the United States.

Table of Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . 1

2 Data, Summary Statistics, and Methodologies . . .. . . . .. . . . .. . . . .. . . . . 4

2.1 Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 5

2.2 Variables, Analysis Samples, and Summary Statistics . . . . . . . . . . . . . 7

2.2.1 Key Variables Specification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2.2.2 Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 8

2.3 Empirical Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3 Heterogeneous Demand Responses by Income . . . . . . . . . . . . . . . . . . . . . 12

3.1 Distributional Pattern of Housing Demand . . . . . . . . . . .. .. . . . . . . . . . . 12

3.1.1 Baseline Model Results . . . . . . . . . . . . . . . .. . .. . .. . .. . .. . .. . . . . . . . . . . . 12

3.1.2 Accounting for Housing Supply & Housing Price . . . . . .. . .. . . . . . . . 13

3.2 Robustness Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

3.2.1 Accounting for State-level Effect . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . . . .17

3.2.2 Accounting for County-level Effect . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . 18

3.3 Results Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . .. . . .. . 20

4 Roles of Housing Prices and Mortgages Rates . . . .. . . .. . . .. . . .. . . .. . . .. .20

4.1 The Effect of Housing Price on Housing Demand . . . . . . . . . . . .. . . . . . .20

4.2 The Effect of Mortgages Rates on Housing Demand . . . . . . . . . . . .. . . . .22

5 Conclusion . . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . . . . .. . . .. . . .. . . .. . . .. . . 25

6 Appendix: Figures & Tables .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . . 28

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