TAXES, INCOME-DISTRIBUTION, AND THE REAL-ESTATE CYCLE - WHY ALL HOUSES DO NOT APPRECIATE AT THE SAME RATE

Changes in house prices are generally reported on an aggregate basis. This article suggests that within a metropolitan area, high-value and low-value homes appreciate at different rates. Overall, the author's r esults indicate that appreciation rates are more volatile for high-pri ced homes than for less expensive homes around the real estate cycle. The different rates of price appreciation are partly explained by chan ges in the user cost of owning a home. Cyclical factors also play a pa rt. Furthermore, the author found that changes in the prices of lower- value homes have a contemporaneous effect on high-end home prices, whi le the opposite is not true. His results suggest that in a house-price boom, first-time homebuyers may be in a better position to buy a low- priced home than the reported, aggregate price index suggests.