Media Coverage and Home Prices: A Study of the U.S. Housing Market

Abstract

Due to the constant increase in home prices in the U.S., some analysts have raised concerns with regards to the existence of a housing bubble. While some argued that the fundamental cause of this bubble differs from the one in 2005. To what extent can these analyses influence homebuyers and home prices? This research paper aims to fill in a literature gap as there is limited research done on the impact of media coverage on home prices that focuses on the U.S. market. Although similar studies have been conducted on other countries, the differences in their findings could suggest that the results cannot be extrapolated and implemented into the U.S. cities context. This paper studies the various impact of media coverage of 20 U.S. cities between 2001 and 2015. Firstly, this paper seeks to establish the relationship between media coverage and home prices. Secondly, regression analysis is used to affirm this relationship. The data is then further categorise into 2 groups, namely before peak year-month (PYM) and after PYM, by identifying the PYM in terms of the HPI. After detailed analysis and considerations, we find that on the city level, media coverage can be used to explain the change in HPI in the following cities: Boston, Chicago, Cleveland, Detroit, New York, San Diego, Seattle and Washington. Being the top few favourites of tourist destination and with the rise of home-sharing websites, investment opportunities flows into the eyes of investors. With information efficiency, the media is likely to influence HPI. Similar results can be concluded from the analysis of the PYM categories. With the exception of Seattle and Washington, together with the abovementioned cities, the change in HPI of Las Vegas, Los Angeles and Tampa can be explained by the increase in media coverage in the after PYM category. As the news reporting on declining home prices become more prominent, the change in perception of home owners towards the worth of their property would lead to a change in HPI. Hence, we can conclude that while an increase in media coverage generally cause a decrease in home prices, it can only be used to explain the change in home prices to a certain extent.