Ben McCartney | Source | Assistant Professor of Commerce at University of Virginia

It’s not too soon to wonder whether he’s on to something.

Political identity and partisanship are salient features of today's society. Using deeds records and voter rolls, we show that current residents are more likely to sell their homes when opposite-party neighbors move in nearby than when unaffiliated or same-party neighbors do. This is especially true when the new neighbors are politically active, consistent with an animosity between parties mechanism. We conclude that affective polarization is not limited to purely political settings and affects one of the household's most important financial decisions, their home transactions.

Neighborhood peer effects have been shown to affect households publicly observable decisions, but how they affect private decisions, like mortgage refinancing, remains unclear. Using precisely geolocated data and a nearest-neighbor research design, we find that households are 7% more likely to refinance if a neighbor within 50 m has recently refinanced. Consistent with a word-of-mouth mechanism, social influence effects are stronger when neighbors live especially nearby, weaker when owners are non-occupants, and stronger when neighbors and owners are of the same race. Our results suggest an important role for neighborhood peer effects in explaining regional variation in refinancing activity.