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The local employment effect of house prices: Evidence from U.S. States

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  • Kishor, N. Kundan
  • Marfatia, Hardik A.
  • Nam, Gooan
  • Rizi, Majid Haghani

Abstract

We examine the local demand channel hypothesis of the housing market that predicts a larger response of employment in the non-tradable sector to house price shocks than employment in the tradable sector using state-level monthly data from 1990:M1-2019:M12. Our results from a panel VAR model and out-of-sample forecasting analysis confirm a larger response of non-tradable employment to house price changes. In addition, we also find that unlike short-lived responses to shocks to income and building permits, house price shocks have a very persistent effect on employment. Our findings suggest that states with inelastic housing supply and more volatile house prices tend to have a bigger improvement in forecasting performance for non-tradable employment than for tradable employment.

Suggested Citation

  • Kishor, N. Kundan & Marfatia, Hardik A. & Nam, Gooan & Rizi, Majid Haghani, 2022. "The local employment effect of house prices: Evidence from U.S. States," Journal of Housing Economics, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:jhouse:v:55:y:2022:i:c:s1051137721000607
    DOI: 10.1016/j.jhe.2021.101805
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    More about this item

    Keywords

    Housing Prices; Panel VAR Models; Regional Forecasting; Tradable and Non-Tradable Employment;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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