Industry Concentration and Regional Housing Market Performance

Prior literature has analyzed determinants of housing appreciation rates at the regional level, including several studies on inter-regional differences. Generally, these previous studies have identified income, population shifts, and other demographic changes as the most im-portant factors in explaining regional price appreciation for single-family residential proper-ties. Existing literature has not considered the impact that regional industry concentration might have on regional housing appreciation. This study uses a Federal Housing Finance Ad-ministration price index, along with demographic and industry concentration data collected from the U.S. Census and the Bureau of Labor Statistics, to investigate whether a more or less highly concentrated industry base, as measured by a Herfindahl index, contributes to regional housing market performance. The questions of housing market impacts related to increasing concentration for a reasonably diversified metropolitan statistical area and impacts related to increasing diversification for an already-concentrated area are also examined.