Abstract

Household income is a fundamental determinant of housing prices, as it directly shapes purchasing power and housing demand across regions. Higher income levels enhance access to housing and expand market participation, while lower income levels restrict affordability and limit opportunities for homeownership. This study uses a balanced panel data set of California counties from 2013 to 2024 and analyzes the impact of economic and financial conditions on housing prices. ​​The findings, based on the fixed-effect model, suggest that economic and demographic factors, such as income growth and population expansion, have a positive and significant effect on housing price growth. This research also considers housing supply factors such as housing permits, construction spending, and vacancy rate and analyzes its impact on housing prices. After controlling for other factors, the impact of housing prices remains robust in terms of sign and significance.  The findings suggest that constraints on housing supply, such as restrictive zoning laws, prevent the market from adjusting to rising demand. This highlights the need for policies that expand housing availability to improve market responsiveness and affordability.

Keywords

Housing Prices, Housing Affordability, Panel Data Housing Supply Constraints

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