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Large price movements in housing markets

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  • Sun, Xiaojin
  • Tsang, Kwok Ping

Abstract

This paper examines large price run-ups with potential subsequent crashes and large price declines with potential subsequent rebounds in state-level and metropolitan-area-level housing markets in the U.S. over the past 40 years. We find that a sharper run-up in house prices predicts a higher probability of a crash, but a sharper decline does not necessarily predict a higher probability of a rebound. Changes in the effective interest rate in the local market can predict housing returns following large price run-ups, while it is harder to use the same factors to predict returns following large price declines. Such characteristics are robust to different thresholds of price movements.

Suggested Citation

  • Sun, Xiaojin & Tsang, Kwok Ping, 2019. "Large price movements in housing markets," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 1-23.
  • Handle: RePEc:eee:jeborg:v:163:y:2019:i:c:p:1-23
    DOI: 10.1016/j.jebo.2019.05.012
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    Cited by:

    1. Rangan Gupta & Hardik A. Marfatia & Christian Pierdzioch & Afees A. Salisu, 2020. "Machine Learning Predictions of Housing Market Synchronization across US States: The Role of Uncertainty," Working Papers 202077, University of Pretoria, Department of Economics.
    2. Sheng, Xin & Marfatia, Hardik A. & Gupta, Rangan & Ji, Qiang, 2021. "House price synchronization across the US states: The role of structural oil shocks," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    3. Sheng, Xin & Marfatia, Hardik A. & Gupta, Rangan & Ji, Qiang, 2021. "House price synchronization across the US states: The role of structural oil shocks," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    Predictability; Crashes; Rebounds; Bubbles; House prices;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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