COVID-19 and Housing Prices: Evidence from U.S. County-Level Data
One sentence summary: The effects of COVID-19 cases on housing prices are negative and significant after controlling for other factors.
The corresponding academic paper by Hakan Yilmazkuday has been accepted for publication at Review of Regional Research.
The working paper version is available here.
Abstract
This paper investigates the effects of coronavirus disease 2019 (COVID-19) on housing prices at the U.S. county level. The effects of COVID-19 cases on housing prices are formally investigated by using a two-way fixed effects panel regression, where county-specific factors, time-specific factors, and mobility measures of individuals are controlled for. The benchmark results show evidence for negative and significant effects of COVID-19 cases on housing prices, robust to the consideration of several permutation tests, where the negative effects are more evident in counties with higher poverty rates. Exclusion tests further suggest that U.S. counties in the state of California or the month of May 2020 are more responsible for the empirical results, although the results based on other counties and months are still in line with the benchmark results.
Non-technical Summary
The coronavirus disease 2019 (COVID-19) has resulted in not only a health crisis through its direct effects but also an economic one through its indirect effects. These indirect effects are reflected in housing prices within the U.S. in an unequal way across counties, where housing prices have increased by about $1,408 on average across counties on a monthly basis (between February 2020 and August, 2021), with a range between $1,979 of a reduction and $14,963 of an increase. Within this context, what is the contribution of COVID-19 cases on this heterogeneity representing unequal changes in housing prices across U.S. counties? The answer to this equation depends on several channels that affect the housing market at the local (U.S. county) level.
This paper investigates this heterogeneity representing unequal changes in housing prices across U.S. counties due to COVID-19 cases. The formal investigation is achieved by using a two-way fixed effects panel regression, where county-specific and time-specific factors are controlled for. Several mobility measures of individuals are also considered as control variables as they not only represent the overall economic activity at the U.S. county level over time but also the developments in the housing sector at the U.S. county level over time due to staying at home as a housing-demand shifter.
The benchmark empirical results show evidence for negative and significant effects of COVID-19 cases on housing prices, and they have been confirmed by several robustness checks based on permutation tests, exclusion tests, or interactions with other variables.
When the channels of causality are further investigated, poverty is shown to be an important factor. Specifically, the U.S. counties with higher rates of poverty have experienced more reductions in housing prices due to COVID-19, whereas those with lower rates of poverty have experience almost no changes (or sometimes increases) in housing prices. Therefore, there is evidence for unequal effects of COVID-19 on housing prices across U.S. counties due to poverty differences.
The corresponding academic paper by Hakan Yilmazkuday has been accepted for publication at Review of Regional Research.