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Negative house price co-movements and US recessions

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  • Christiansen, Charlotte
  • Eriksen, Jonas N.
  • Møller, Stig V.

Abstract

We investigate the relation between large negative house price co-movements in the cross-section of US cities and the national business cycle. The occurrences of large negative house price co-movements across cities cluster over time and these clusters are closely linked to NBER recession dates. A simple co-movement measure that aggregates large negative city-level house price returns reliably predicts future recession periods. Weighting cities according to population or GDP when constructing the negative co-movement variable yields the largest forecasting power, indicating that larger cities that contribute more to the national GDP are more influential in terms of correctly signalling future recessions. Moreover, large negative house price co-movements contribute above and beyond traditional recession predictors, suggesting an important role for city-level housing information as an early warning indicator.

Suggested Citation

  • Christiansen, Charlotte & Eriksen, Jonas N. & Møller, Stig V., 2019. "Negative house price co-movements and US recessions," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 382-394.
  • Handle: RePEc:eee:regeco:v:77:y:2019:i:c:p:382-394
    DOI: 10.1016/j.regsciurbeco.2019.06.007
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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. Xin Sheng & Hardik A. Marfatia & Rangan Gupta & Qiang Ji, 2020. "House Price Synchronization across the US States: The Role of Structural Oil Shocks," Working Papers 202076, University of Pretoria, Department of Economics.
    3. Harri Pönkä & Markku Stenborg, 2020. "Forecasting the state of the Finnish business cycle," Finnish Economic Papers, Finnish Economic Association, vol. 29(1), pages 81-99, Spring.

    More about this item

    Keywords

    Housing; Business cycles; Negative returns; Co-movements;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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