Daniel P. Murphy

Category: Housing Markets

  • The Effect of Mortgage Rates on Neighborhood Housing Costs

    with DeShawn Vaughan
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    Abstract

    We estimate zip-level “housing cost sensitivities” (HCS)—the percent change in local home prices or rents per 1% increase in national home prices caused by Ben-David et a. (2024) mortgage-rate shocks. Using Zillow home-value and rent indices for over 13,000 zip codes, we find wide heterogeneity. Across the interquartile range, local home prices rise between 0.3% to 2.0%, while rents range from -1.5% to $1.1%. We find the HCS are strongly regressive: lower-income zips exhibit substantially larger responses for both prices and rents. Zip-level home-price HCS are highly correlated with the city-level inverse supply elasticity of Guren et al. (2021), yet meaningful unexplained variation remains. Beyond supply constraints, we find that demand amplification (natural amenities), land-cost pass-through, and housing-market liquidity all shape HCS. Our results quantify where mortgage-rate movements most strongly transmit into local housing costs and clarify the mechanisms underlying that heterogeneity.

  • Implicit Land Taxes and Their Effect on the Real Economy

    with Nathan Seegert, Journal of Public Economics, Read

    Abstract

    Land taxes are widely viewed as an efficient source of public revenue, yet explicit land taxation is rarely implemented. We study a closely related but largely overlooked object: implicit land taxes that arise within standard property tax systems when tax assessments place different relative weights on land and structures than market valuations do. Using parcel-level data on assessed values and transaction prices from U.S. counties, we estimate these implicit land taxes by comparing assessor and market hedonic valuations. We find substantial dispersion in implicit land taxes across and within metropolitan areas. Counties with higher implicit land taxes experience faster growth in population density, business establishments, earnings, and demographic diversity. These patterns are consistent with theoretical predictions that taxing land more heavily than structures encourages denser and more productive development.

  • Work From Home and the Post-COVID Spending Surge

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    Abstract

    U.S. personal saving rates have remained below pre-pandemic levels. This paper links the sustained increase in consumption to the rise of working from home (WFH). Using PSID 2019–2023 data and an industry-based instrument for WFH, I find that households induced to WFH raised expenditure by more than \$7,000 on average, holding income and wealth constant. Spending rose not only among movers but also among non-movers, consistent with a persistent shift in preferences toward housing-complementary consumption. The estimates imply that WFH reduced the aggregate saving rate by 1.2 percentage points, and they suggest that remote work structurally increased demand for housing-related consumption, contributing to the post-pandemic spending boom.

  • Land Taxes: From Theory to Practice

    with Nick B. Allen, John Anderson and Zhou Yang
    National Tax Journal: 77(4), Read

    Abstract

    The interest in land taxes has increased as concerns around revitalization, increased density, and housing affordability have become widespread. This paper provides multiple perspectives that bridge the gap between theory and practice. We offer new insights into questions of where land taxes are likely to be most effective. We also discuss advantages and disadvantages of alternative features including assessment problems, tax incidence, and implementation challenges. Together this paper provides a guide for policy makers and researchers for the future of land taxes.

  • Home Size, Residential Density, and Aggregate Demand

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    Abstract

    This paper documents that smaller homes and denser neighborhoods are associated with higher household saving rates. This relationship is apparent within and across U.S. households, across countries, and over time in the U.S. The micro data indicate the importance of complementarity between housing and non-housing consumption. Incorporating complementarity into a macroeconomic model implies that denser countries with smaller homes have higher household savings rates, a lower natural rate of interest, and lower sensitivity of non-housing consumption to monetary policy. Furthermore, growth in the non-housing sector alongside stable home sizes is associated with a declining natural rate of interest. High density and small homes may contribute to Japan’s lost decade and persistent stagnation.

  • Housing cycles and gentrification

    Journal of Monetary Economics, 144, 103550, Read

    Abstract

    The analysis in this paper documents a high-frequency link between housing markets and downtown gentrification since the mid-1990s. Specifically, property values and the share of formally educated residents increase more in downtown locations than in suburbs during MSA-wide housing market expansions. This relationship holds conditional on changes in MSA-level high-end incomes and is evident at short (three-year) and longer time horizons. I propose a mechanism to account for this evidence based on stronger pass-through from housing market expansions to housing costs for low-income (less formally educated) households. This evidence has implications for the effects of macroeconomic stabilization policies on inequality.