Some people don't want to live near poor people. A legal way to do this (amidst the many illegal housing discrimination practices) is to choose to live in an area where property values are high. This might lead to a curious scenario where the market demand for a property becomes greater if the price goes up, all other things remaining the same.
It's even more curious because it's not the price of the property in question that the potential buyer cares about, but the other properties in the neighborhood. I suspect game theory. How can neighbors conspire to raise the price of a house?
1 comment :
I had this same insight and then happily found your post when I discovered the term Veblen Good.
My initial thoughts,
If there is competition among housing suppliers, we should expect some component or package of components of real estate to drive the initial price increase. The components with the greatest utility, in themselves, to the potential customers would be things like lot size, location, square footage, and construction quality. Components like chic kitchens or swimming pools would segment the demand.
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