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On the Link between House Prices and House Permits: Asymmetric Evidence from 51 States of the United States of America

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (The University of Wisconsin-Milwaukee)

  • Hesam Ghodsi

    (Charles Schwab and Co. Inc.)

  • Muris Hadzic

    (Lake Forest College)

Abstract

Increased issuance of housing permits is said to move house prices in either direction. If perceived as an indication of a growing housing supply, house prices are expected to decline (supply hypothesis). However, a larger number of housing permits can also reflect positive expectations about future housing demand which would drive house prices upwards (demand hypothesis). We test these two competing hypotheses by using data from each state in the United States. We estimate linear and non-linear models to test if housing permit issuance determines house prices. The results show support for both the supply and demand hypotheses in the short run for most states but only for the demand hypothesis in the long run. We also uncover asymmetric short-run and long-run effects in 21 states.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hesam Ghodsi & Muris Hadzic, 2021. "On the Link between House Prices and House Permits: Asymmetric Evidence from 51 States of the United States of America," International Real Estate Review, Global Social Science Institute, vol. 24(3), pages 323-361.
    • Handle: RePEc:ire:issued:v:24:n:03:2021:p:323-361
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    References listed on IDEAS

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    More about this item

    Keywords

    House Prices; House Permits; Nonlinear ARDL Approach; Asymmetry;
    All these keywords.

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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