Does greater labour market freedom lead to lower new home prices in the US? An exploratory inquiry

ABSTRACT

In this study for the year 2014 for the United States, we find that the median price of new single-family homes was an increasing function of the state’s median family income, the number of miles of coastline in the state and the state’s population density. In addition, the evidence suggests that the median new home price may been a decreasing function of the crime rate. Finally, of particular interest to this study, is the finding that a higher degree of labour market freedom led to lower prices on newly constructed single-family homes.

KEYWORDS:

• New home prices
• labour market freedom
• amenity capitalization
• population density and land prices

JEL CLASSIFICATION:

• O18
• J38
• P10
• R21

Notes

¹ See Stansel, Torra, and McMahon (2014, 11–14) for a detailed description and explanation of these components.

² This attribute, where applicable, is (positively) capitalized into the new home prices.

³ Higher crime rates are capitalized (negatively) into the new home prices.

⁴ A higher POPDENSj value is expected to have a positive impact on the new home housing price. Arguably, population density is a proxy for urbanization, the population percentage residing in urban areas; indeed, it was found that r = 0.533.