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Housing Price Volatility Changes and Their Effects

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  • Walter Dolde
  • Dogan Tirtiroglu

Abstract

We examine significant volatility shifts in regional housing price changes, adapting a method of Haugen, Talmor and Torous (1991) independent of predefined sampling blocks. We identify 36 volatility events, most of which are purely regional, but three of which are national. We find significant associations of volatility events and economic conditions, especially national and regional income growth, inflation, and interest rates. During an initial adjustment period after a volatility shift, realized housing returns move opposite to volatility. We find evidence of significant interregional diffusion of volatility increases, but not of decreases. New insights on links between economic conditions and housing volatility and returns should be of value to household investors and mortgage investors.

Suggested Citation

  • Walter Dolde & Dogan Tirtiroglu, 2002. "Housing Price Volatility Changes and Their Effects," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(1), pages 41-66.
    • Handle: RePEc:bla:reesec:v:30:y:2002:i:1:p:41-66
    DOI: 10.1111/1540-6229.00029
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    Cited by:

    1. Haiwei Chen, 2017. "Real Estate Transfer Taxes and Housing Price Volatility in the United States," International Real Estate Review, Global Social Science Institute, vol. 20(2), pages 207-219.
    2. Norman Miller & Liang Peng, 2006. "Exploring Metropolitan Housing Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 5-18, August.
    3. Simlai, Prodosh, 2014. "Estimation of variance of housing prices using spatial conditional heteroskedasticity (SARCH) model with an application to Boston housing price data," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 17-30.
    4. Prodosh Simlai, 2018. "Spatial Dependence, Idiosyncratic Risk, and the Valuation of Disaggregated Housing Data," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 192-230, August.
    5. Christos S. Savva & Nektarios A. Michail, 2017. "Modelling house price volatility states in Cyprus with switching ARCH models," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 11(1), pages 69-82, June.
    6. Simlai, Prodosh, 2019. "Subprime credit, idiosyncratic risk, and foreclosures," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 175-189.
    7. Eddie Chi-man Hui & Xian Zheng, 2012. "The dynamic correlation and volatility of real estate price and rental: an application of MSV model," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2985-2995, August.
    8. Yuan Zhang & Yiguo Sun & Thanasis Stengos, 2019. "Spatial Dependence in the Residential Canadian Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 223-263, February.
    9. Belayet Hossain & Ehsan Latif, 2009. "Determinants of housing price volatility in Canada: a dynamic analysis," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3521-3531.
    10. Daniel Lo & Kwong Wing Chau & Siu Kei Wong & Michael McCord & Martin Haran, 2022. "Factors Affecting Spatial Autocorrelation in Residential Property Prices," Land, MDPI, vol. 11(6), pages 1-16, June.
    11. Rangan Gupta & Chi Keung Marco Lau & Wendy Nyakabawo, 2018. "Predicting Aggregate and State-Level US House Price Volatility: The Role of Sentiment," Working Papers 201866, University of Pretoria, Department of Economics.
    12. Chyi Lin Lee, 2017. "An examination of the risk-return relation in the Australian housing market," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(3), pages 431-449, June.
    13. Diandian Ma & Benfu Lv & Xuerong Li & Xiuting Li & Shuqin Liu, 2023. "Heterogeneous Impacts of Policy Sentiment with Different Themes on Real Estate Market: Evidence from China," Sustainability, MDPI, vol. 15(2), pages 1-21, January.
    14. Hong Miao & Sanjay Ramchander & Marc W. Simpson, 2011. "Return and Volatility Transmission in U.S. Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 701-741, December.
    15. Su Han Chan & Ko Wang & Jing Yang, 2003. "Pricing Factors in Real Estate Markets: A Simple Preference Based Approach," International Real Estate Review, Global Social Science Institute, vol. 6(1), pages 102-120.
    16. Chang, Kuang-Liang, 2010. "House price dynamics, conditional higher-order moments, and density forecasts," Economic Modelling, Elsevier, vol. 27(5), pages 1029-1039, September.
    17. Esta Lestari, 2010. "Volatility Spillover Effects in East Asian Capital Markets: A Case Study of the Real Estate Sectors," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 58, pages 57-82, April.

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