Out-of-state real estate investment and housing affordability pressures in the Lehigh Valley

This study examines the deepening housing affordability crisis in the United States through a case study of Pennsylvania’s Lehigh Valley, where inflation-adjusted real estate sale prices increased significantly between 1980 and 2025. We analyze the role of out-of-state (OOS) speculative investment and its impact on affordability, equity, and neighborhood composition. Results show that OOS buyers engage in significantly higher value transactions, paying 2.5 times more on average for residential properties than in-state (IS) buyers. OOS purchases are highly spatially concentrated, disproportionately targeting economically disadvantaged neighborhoods and communities with lower proportions of white residents, suggesting highly speculative and strategic market behavior. Using a fixed-effect spatial error model, we find that a 1 percentage point increase in OOS purchases corresponds to roughly a 1.8% increase in average housing price after controlling for tract-level demographics, income, housing availability, and year-to-year variation. These patterns point to the urgent need for targeted interventions to curb the impact of speculative OOS purchases and protect vulnerable communities.