Regional composition of national house price cycles in the US

Arbeitspapier

House price cycles may have considerable macroeconomic effects even if they evolve heterogeneous across local markets. In this paper we use a panel Markov switching model allowing for time-varying volatility to analyze national and state level house price regimes for the US jointly. Our approach identifies three house price regimes endogenously. A nationwide boom regime, a spatially limited bust regime and a nationwide bust regime. The spatially limited bust regime occurs in the coastal states where compared to other states the population density is high, the unemployment rate, the housing density as well as the land supply elasticity is low. This spatially limited bust regime usually follows a nationwide house price boom. Hence, house price movements in the coastal states usually determine the nationwide cycle in the US. Moreover, boom and bust cycles are accompanied by an exaggeration of house price increases during the boom in this group of states. In contrast, a bubble in the housing market occored in almost all states previous to the Great Recession. This is one explanation for the severity of the Great Recession.

Object Details

• ISBN: 978-3-86788-989-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 853

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Housing Supply and Markets ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: house price cycles ; regional house prices ; Markov switching

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Prüser, Jan ; Schmidt, Torsten
• Event: Veröffentlichung
• (who): RWI - Leibniz-Institut für Wirtschaftsforschung
• (where): Essen
• (when): 2020

Further information

• DOI: doi:10.4419/86788989
• Handle: http://hdl.handle.net/10419/220357
• Last update: 10.03.2025, 11:45 AM CET