Housing Prices and Fundamentals: The Role of a Supply Shifter
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.
Volume (Year): 31 (2011)
Issue (Month): 3 ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jian Zhou, 2010. "Testing for Cointegration between House Prices and Economic Fundamentals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 599-632, Winter.
- Jakob B Madsen, 2011. "A q Model of House Prices," Monash Economics Working Papers 03-11, Monash University, Department of Economics.
- D.R. Capozza & C. Mack & P.H. Hendershott & C.J. Mayer, 2002. "The Determinants of House Price Dynamics," ERES eres2002_106, European Real Estate Society (ERES).
- Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack & Christopher J. Mayer, 2002. "Determinants of Real House Price Dynamics," NBER Working Papers 9262, National Bureau of Economic Research, Inc.
- P. Zemcik & V. Mikhed, 2009. "Do House Prices Reflect Fundamentals? Aggregate and Panel Data Evidence," ERES eres2009_275, European Real Estate Society (ERES).
- Stephen Malpezzi, 1998.
"A Simple Error Correction Model of House Prices,"
Wisconsin-Madison CULER working papers
98-11, University of Wisconsin Center for Urban Land Economic Research.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January.
- James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 729-752.
- Holly, Sean & Pesaran, M. Hashem & Yamagata, Takashi, 2010.
"A spatio-temporal model of house prices in the USA,"
Journal of Econometrics,
Elsevier, vol. 158(1), pages 160-173, September.
- Holly, S. & Pesaran, M.H. & Yamagata. T., 2006. "A Spatio-Temporal Model of House Prices in the US," Cambridge Working Papers in Economics 0654, Faculty of Economics, University of Cambridge.
- Holly, Sean & Pesaran, M. Hashem & Yamagata, Takashi, 2006. "A Spatio-Temporal Model of House Prices in the US," IZA Discussion Papers 2338, Institute for the Study of Labor (IZA).
- Sean Holly & M. Hashem Pesaran & Takashi Yamagata, 2006. "A Spatio-Temporal Model of House Prices in the US," CESifo Working Paper Series 1826, CESifo Group Munich.
- Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Vyacheslav Mikhed & Petr Zemcik, 2007.
"Do House Prices Reflect Fundamentals? Aggregate and Panel Data Evidence,"
CERGE-EI Working Papers
wp337, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
- Mikhed, Vyacheslav & Zemcík, Petr, 2009. "Do house prices reflect fundamentals? Aggregate and panel data evidence," Journal of Housing Economics, Elsevier, vol. 18(2), pages 140-149, June.
- James G. MacKinnon, 1990.
"Critical Values for Cointegration Tests,"
1227, Queen's University, Department of Economics.
- Tom Doan, . "EGTEST: RATS procedure to compute Engle-Granger test for Cointegration," Statistical Software Components RTS00061, Boston College Department of Economics.
- James G. MacKinnon, 2010. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
- Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
- Zephyr, 2010. "The city," City, Taylor & Francis Journals, vol. 14(1-2), pages 154-155, February.
- Malpezzi, Stephen & Maclennan, Duncan, 2001. "The Long-Run Price Elasticity of Supply of New Residential Construction in the United States and the United Kingdom," Journal of Housing Economics, Elsevier, vol. 10(3), pages 278-306, September.
- Meen, Geoffrey, 2002. "The Time-Series Behavior of House Prices: A Transatlantic Divide?," Journal of Housing Economics, Elsevier, vol. 11(1), pages 1-23, March.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00314. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.