Housing Prices and Fundamentals: The Role of a Supply Shifter
AbstractThe present paper empirically investigates the cointegrating relation between housing prices and economic fundamental variables in the US housing market. Employing simple yet rigorous econometric techniques, the present paper finds strong evidence in favor of cointegrating relations in most US states when both demand and supply side fundamental variables are included in the cointegrating regression. This result casts doubt on previous empirical work that reports a lack of cointegrating relations of housing prices with mostly demand-side fundamental variables. The previous literature may suffer a misspecification problem. Further, the present cointegrating vector estimates seem consistent with economic theory only when both demand and supply variables are included.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 31 (2011)
Issue (Month): 3 ()
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Housing prices; cointegration;
Other versions of this item:
- Durmaz, Nazif, 2011. "Housing Prices and Fundamentals: The Role of a Supply Shifter," MPRA Paper 28556, University Library of Munich, Germany.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
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