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Hot And Cold Housing Markets: International Evidence

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  • Jose Ceron
  • Javier Suarez

    ()
    (CEMFI, Centro de Estudios Monetarios y Financieros)

Abstract

This paper examines the experience of fourteen developed countries for which there are about thirty years of quarterly inflation-adjusted housing price data. Price dynamics is modelled as a combination of a country-specific component and a cyclical component is a two-state variable captures previously undocumented changes in the volatility of real housing price increases. These volatility phases are quite persistent (about six years,on average) and occur with about the same unconditional frequency over time. In line with previous studies, the mean of real housing price increases can be predicted to be larger when lagged values of those increases are large, real GDP growth is high, unemployment falls, and interest rates are low or have declined. Our findings have important implications for risk management in regard to residential property markets.

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Bibliographic Info

Paper provided by CEMFI in its series Working Papers with number wp2006_0603.

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Date of creation: Jan 2006
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Handle: RePEc:cmf:wpaper:wp2006_0603

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Keywords: Housing prices; cycles; volatility; Markov switching.;

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