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On the cyclicity of regional house prices: New evidence for U.S. metropolitan statistical areas

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  • Flor, Michael A.
  • Klarl, Torben

Abstract

This paper is mainly concerned with the analysis of regional house price cycles. We introduce a wavelet transform based metric to study the housing cycle synchronization across the largest U.S. MSAs with a focus on the recent housing bubble. We derive several conclusions: (i) We show that regional housing cycle dissimilarities are significantly and strongly connected to geography. (ii) After the burst of the recent housing bubble there was greater significant co-movement in shorter cycles for a short period of time. (iii) Coastal regions, which have a higher house price volatility compared to other MSAs are also those with a higher degree of house supply regulation. (iv) A mortgage-rate reduction decrease the dissimilarity between the MSAs and the national housing cycle before the end of 2006 at higher frequencies. Hence, monetary policy is partially effective, whereas effectiveness depends on time, frequency, and the considered MSA.

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  • Flor, Michael A. & Klarl, Torben, 2017. "On the cyclicity of regional house prices: New evidence for U.S. metropolitan statistical areas," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 134-156.
  • Handle: RePEc:eee:dyncon:v:77:y:2017:i:c:p:134-156
    DOI: 10.1016/j.jedc.2017.02.001
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    More about this item

    Keywords

    Continuous wavelet transform; Housing cycles; Regional house price synchronization; Wavelet distance matrix;
    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
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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