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A Regional Decomposition of US Housing Prices and Volume: Market Dynamics and Economic Diversification Opportunities

Author

Listed:
  • Nikolaos Antonakakis

    (Webster Vienna Private University)

  • Ioannis Chatziantoniou

    (Portsmouth Business School)

  • David Gabauer

    (Webster Vienna Private University, Johannes Kepler University)

Abstract

In this study we employ a TVP-VAR model in order to investigate dynamic connectedness of housing prices and sales volume across four US regional housing markets; namely, Midwest, Northeast, South, as well as, West, for the period between January 1990 and March 2019. Furthermore, utilising an insightful decomposition of the results, we provide a thorough investigation of the underlying dynamics. Overall, results indicate that during turbulent economic periods, it is sales volume shocks that drive developments in the US housing market, rather than shocks in housing prices. In addition, we find that the South is rather a persistent net transmitter of both prices and volume housing market shocks, while the Northeast, a net receiver. On the whole, all four markets assume both roles over time. Results are important for policy makers and regulators aiming to alleviate the negative ramifications of an overheated housing market. In addition, given that over time, the four markets behave differently in connection with their short run shock-transmission capacity, results are also suggestive that there is potential for economic (i.e., rather than strictly geographical) portfolio diversification.

Suggested Citation

  • Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2019. "A Regional Decomposition of US Housing Prices and Volume: Market Dynamics and Economic Diversification Opportunities," Working Papers in Economics & Finance 2019-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2019-06
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    More about this item

    Keywords

    US regional housing markets; Housing prices; Transaction volume; TVP-VAR; Dynamic connectedness; Dynamic connectedness decomposition;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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