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Local house-price vulnerability: Evidence from the U.S. and Canada

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  • Alter, Adrian
  • Mahoney, Elizabeth M.

Abstract

To quantify downside risks to housing markets, we apply and extend the house price-at-risk methodology to a sample of 37 cities across the United States and Canada using quarterly data from 1983 to 2018. Our findings suggest that downside risks to housing markets in the United States have seemingly fallen after the global financial crisis, while having increased in Canada. Local factors such as supply availability and valuation proxies are found to be significantly associated with future downside risks to major housing markets, but their effect varies across cities and time horizons. We find important spatial dependence in housing risks, with overvaluation in nearby cities increasing downside risks to house prices in a given city. Additionally, macro-financial drivers such as household debt, capital flows, and financial conditions play a key role in forecasting house price risks. Using micro-level data from California, we highlight the heterogeneity of tail risks across counties and the role played by local factors in forecasting housing risks.

Suggested Citation

  • Alter, Adrian & Mahoney, Elizabeth M., 2021. "Local house-price vulnerability: Evidence from the U.S. and Canada," Journal of Housing Economics, Elsevier, vol. 54(C).
  • Handle: RePEc:eee:jhouse:v:54:y:2021:i:c:s1051137721000413
    DOI: 10.1016/j.jhe.2021.101791
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    More about this item

    Keywords

    Housing market; Local factors; Spatial dependence; Quantile regressions;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • 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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