Housing prices and import competition

We examine one of the secondary effects of the import surge from China in the last few decades: its potentially depressing impact on house price appreciations. To identify a causal impact, we use the granting of Permanent Normal Trade Relations (PNTR) to China in October 2000 as our exogenous treatment event. We consider housing prices for 685 US commuting zones (CZs) in a panel data setting for the years 1990–2020. We find that the 2000 PNTR trade event caused house prices to appreciate about 7 percent less in highly import-exposed CZs within 5–6 years of the trade event and that the price impact has persisted through 2020. The size of the average impact is highly robust to various sensitivity checks. We also show that the price effect of the 2000 PNTR event varied significantly across CZs with different import exposure to China and with different economic characteristics. In some areas, such as around the Great Lakes and parts of Alabama, house prices appreciated by only about half as much between 2000 and 2020 (< 25%) as would have been expected in the absence of the 2000 PNTR policy event.