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Clustered housing cycles

Author

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  • Hernández-Murillo, Rubén
  • Owyang, Michael T.
  • Rubio, Margarita

Abstract

Using a panel of U.S. city-level building permits data, we estimate a Markov-switching model of housing cycles that allows cities to systematically deviate from the national housing cycle. These deviations occur for clusters of cities that experience simultaneous housing contractions. We find that cities do not form housing regions in the traditional geographic sense. Instead, similarities in factors affecting the demand for housing (such as population growth or availability of credit) appear to be more important determinants of cyclical co-movements than similarities in factors affecting the supply for land (such as the availability of developable land or the elasticity of land supply).

Suggested Citation

  • Hernández-Murillo, Rubén & Owyang, Michael T. & Rubio, Margarita, 2017. "Clustered housing cycles," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 185-197.
  • Handle: RePEc:eee:regeco:v:66:y:2017:i:c:p:185-197
    DOI: 10.1016/j.regsciurbeco.2017.06.003
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jmacro:v:56:y:2018:i:c:p:152-171 is not listed on IDEAS
    2. Michael Funke & Robert Kirkby & Petar Mihaylovski, 2017. "House Prices and Macroprudential Policy in an Estimated DSGE Model of New Zealand," CESifo Working Paper Series 6487, CESifo Group Munich.
    3. Funke, Michael & Kirkby, Robert & Mihaylovski, Petar, 2018. "House prices and macroprudential policy in an estimated DSGE model of New Zealand," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 152-171.
    4. Fontana, Alessandro & Corradin, Stefano, 2013. "House price cycles in Europe," Working Paper Series 1613, European Central Bank.

    More about this item

    Keywords

    Clustered Markov switching; Business cycles; Building permits; Co-movements;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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

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