Economists' Outlook

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House Price Growth When Children are Teenagers—A Path to Higher Earnings? A REALTOR® University Speaker Series Presentation

Does house price appreciation prior to children attending college impact their future earnings as adults? This was the subject of a presentation at a recent REALTOR® University Speaker Series by Dr. Daniel Cooper, Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston, who co-authored a study on this question with Maria J. Luengo-Prado.[1]

To listen to the webinar, please click here.[2]

In analyzing the impact of house price growth on children’s future incomes as adults (25 years old or over in 2007), Dr. Cooper and Dr. Luengo-Prado matched child and parent data from families in the Panel Study of Income Dynamics (PSID). The authors identified household heads who were at least 25 years old in 2007, and they matched these household heads with their parents and where they lived when they were 17 years-old (assumed to be the age before they enter college). The sample consists of 892 child respondents who turned 17 between 1979 and 1999 and lived in 126 different metropolitan areas.

The Cooper and Luengo-Prado study found that:

1)      House price appreciation increases the income of homeowners’ children as adults and decreases the income of renters’ children as adults. For every 10 percent increase in home prices that occurred when children were 17 years-old, the income of homeowners’ children as adults was 9 percent higher on average, while the income of renters’ children as adults was 15 percent lower.

2)      The children of homeowners who experience positive house price growth when their children are 17 are more likely to attend a school ranked in the top quartile of colleges and universities than are the children of homeowners that do not experience favorable house price growth. This is one of the channels that links house price growth to income.

3)      While house price growth does not appear to have a consistent influence on the economic mobility of renters’ children, it seems to affect owners’ children. The probability of children ending up in the highest income quartile is lower for all parent income quartiles when house price growth is below the national average than when growth is above the national average. Also, the probability of children ending up in the lowest income quartile is greater when house price growth is below average, particularly for those children with parents whose income is above the lowest income quartile.

Dr. Cooper noted that the results of the study are based on data prior to both the housing boom and the Great Recession and thus may not fully capture the impact of the housing boom and bust on children’s future incomes.

About the Speaker

Dr. Cooper is a senior economist and policy advisor in the macroeconomics/ international economics section of the research department at the Federal Reserve Bank of Boston. His main research interests are related to household consumption and wealth and using microeconomic data to investigate macroeconomic policy questions. Dr. Cooper holds a B.A. in economics from Amherst College and earned M.A. and Ph.D. degrees in economics from the University of Michigan. His CV and full list of publications and studies can be accessed here.

About REALTOR® University Speaker Series

REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.

[1] Daniel Cooper, María José Luengo-Prado, House price growth when children are teenagers: A path to higher earnings?, Journal of Urban Economics, Volume 86, March 2015, Pages 54-72, ISSN 0094-1190, The views expressed in the study are those of the authors and do not necessarily reflect the views the Federal Reserve Bank of Boston or the Federal Reserve System.

[2] The presentation was held on July 29, 2016 at the NAR Washington Office. Thanks to Meredith Dunn, Communications Manager, for recording and editing the webinar video.

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