Date of Award

5-2022

Document Type

Project

Degree Name

Master of Science in Information Systems and Technology

Department

College of Business and Public Administration

First Reader/Committee Chair

Nasrin Mohabbati

Abstract

Real estate property has historically been considered the bedrock of the American Dream and a primary method used to build wealth. However, homeownership has not been attainable for many people because property appreciation rates have consistently exceeded income growth. Available research indicates that rapid appreciation rates pressure low to average income earners out of their counties of residence towards more affordable counties’ residencies. This creates a problem where the receiving counties have increased demand and prices which starts a cycle of migration for lower income populations. Shifting populations can change the economic and demographic characteristics of counties. Previous research that explored determinants of high property appreciation found that it is significantly affected by population growth, demographic characteristics, and proximity to metropolitan cities. However, research regarding demographic or economic change attributed to appreciation rates is scarce. This project sought to answer if property appreciation rate influence changes in racial diversity, income, and population levels in California counties. To accomplish the project’s objective, data was collected from various government agencies for eighteen California counties in a thirty-year period. Then yearly change was calculated for each variable in the data set. Additionally, a racial diversity index was calculated using the Simpson diversity index formula. Once the data was cleaned and prepared, linear regression models were used to determine significance of relationships and the effects of characteristics between appreciation rate and other economic and demographic factors. K-means clustering algorithms were also used to determine if the characteristics of counties had an impact on the relationships. The results of the analysis showed that appreciation rate did not impact population change. The relationship between appreciation rate and income levels had some significance in counties with high property values, indicating that those areas attract only high-income buyers. Additionally, the analysis demonstrated that appreciation rates can be considered a determinant for changes in demographic characteristics within some studied California counties. The significance of the relationships was strongly influenced by the underlying characteristics of each county. Counties with large Asian proportions saw a decline in Black and other racial minority proportions as appreciation rates rose. Racial diversity in counties with lower income levels was significantly impacted by the combination of property appreciation and changes in employment level. The research from this project suggests that future studies should be conducted to determine and understand how characteristics of each county can say about the future state of their economies.

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