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Housing Prices and Fundamentals: The Role of a Supply Shifter

Author

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  • Nazif Durmaz

    () (Stetson University)

Abstract

The present paper empirically investigates the cointegrating relation between housing prices and economic fundamental variables in the US housing market. Employing simple yet rigorous econometric techniques, the present paper finds strong evidence in favor of cointegrating relations in most US states when both demand and supply side fundamental variables are included in the cointegrating regression. This result casts doubt on previous empirical work that reports a lack of cointegrating relations of housing prices with mostly demand-side fundamental variables. The previous literature may suffer a misspecification problem. Further, the present cointegrating vector estimates seem consistent with economic theory only when both demand and supply variables are included.

Suggested Citation

  • Nazif Durmaz, 2011. "Housing Prices and Fundamentals: The Role of a Supply Shifter," Economics Bulletin, AccessEcon, vol. 31(3), pages 2468-2479.
  • Handle: RePEc:ebl:ecbull:eb-11-00314
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    References listed on IDEAS

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    Cited by:

    1. Mustafa Akan, 2013. "A Dynamic Model of Pension Fund Companies," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 13(51), pages 1-20, April.
    2. Baris Teke, 2013. "Effects of a Change in the Composition of IMKB 30 on Stock Performance," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 13(51), pages 21-57, April.
    3. Orhan Erdem & Hande Oruc & Yusuf Varli, 2013. "Housing Market and Macroeconomic Fundamentals," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 13(51), pages 58-81, April.

    More about this item

    Keywords

    Housing prices; cointegration;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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