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House Prices Respond Promptly to Monetary Policy Surprises

Author

Listed:
  • Denis Gorea

  • Augustus Kmetz
  • Oleksiy Kryvtsov
  • Marianna Kudlyak
  • Mitchell Ochse

Abstract

New evidence based on listings of homes for sale from 2000 to 2019 suggests house prices adjust to monetary policy changes over weeks rather than years, faster than previously thought. Housing list prices fall within two weeks after the Federal Reserve announces an unexpected policy tightening, similar to responses of other financial assets. House prices respond more strongly to unexpected changes in long-term interest rates than to surprises in the short-term federal funds rate. Changes in mortgage rates following Fed announcements are key to explaining this rapid house price reaction.

Suggested Citation

  • Denis Gorea & Augustus Kmetz & Oleksiy Kryvtsov & Marianna Kudlyak & Mitchell Ochse, 2023. "House Prices Respond Promptly to Monetary Policy Surprises," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(09), pages 1-5, March.
    • Handle: RePEc:fip:fedfel:95884
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    References listed on IDEAS

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    1. Gorea, Denis & Kryvtsov, Oleksiy & Kudlyak, Marianna, 2022. "House Price Responses to Monetary Policy Surprises: Evidence from the U.S. Listings Data," IZA Discussion Papers 15481, IZA Network @ LISER.
    2. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
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    Cited by:

    1. Augustus Kmetz & Schuyler Louie & John Mondragon, 2023. "Where Is Shelter Inflation Headed?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(19), pages 1-6, August.

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