The Impact of Interest Rates and Employment on Nominal Housing Prices
This research examines how well nominal income, nominal interest rates and employment explain temporal variation in nominal metropolitan area house prices. Rather than use a traditional model of real house prices, we explain nominal house prices with a measure of "intrinsic" house value that combines local economic factors with an affordable price based upon what the local median income household could afford to pay at prevailing interest rates. The affordable price variable captures local household income trends and current interest rates. We then relate temporal variation in observed house prices to "intrinsic" value and estimate the parameters of separate autoregressive house price models for 316 cities. We observe that the coastal markets exhibit much greater appreciation/ depreciation rates and much more volatility than cities in the central portions of the country. Here we focus primarily on the impact of interest rates on nominal prices in various MSAs, a factor that many housing analyst have pointed to when debating the existence of housing bubbles. Some markets are much more or less responsive to interest rates than others. Supply constraints may explain some of this increased responsiveness.
Volume (Year): 8 (2005)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA|
Web page: http://www.asres.org/
|Order Information:|| Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA|
Web: http://www.asres.org/ Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John M. Clapp & Hyon-Jung Kim & Alan E. Gelfand, 2002. "Predicting Spatial Patterns of House Prices Using LPR and Bayesian Smoothing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 505-532.
- Dennis R. Capozza & Dick Kazarian & Thomas A. Thomson, 1997. "Mortgage Default in Local Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(4), pages 631-655.
- Karl E. Case & Robert J. Shiller, 1988.
"The behavior of home buyers in boom and post-boom markets,"
New England Economic Review,
Federal Reserve Bank of Boston, issue Nov, pages 29-46.
- Robert J. Shiller & Karl E. Case, 1988. "The Behavior of Home Buyers in Boom and Post-Boom Markets," Cowles Foundation Discussion Papers 890, Cowles Foundation for Research in Economics, Yale University.
- Karl E. Case & Robert J. Shiller, 1988. "The Behavior of Home Buyers in Boom and Post-Boom Markets," NBER Working Papers 2748, National Bureau of Economic Research, Inc.
- Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack, 2004. "An Anatomy of Price Dynamics in Illiquid Markets: Analysis and Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 1-32, 03.
- Clapp John M. & Giaccotto Carmelo, 1994. "The Influence of Economic Variables on Local House Price Dynamics," Journal of Urban Economics, Elsevier, vol. 36(2), pages 161-183, September.
- David M. Harrison & Thomas G. Noordewier & K. Ramagopal, 2002. "Mortgage Terminations: The Role of Conditional Volatility," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 89-110.
- Gillen, Kevin & Thibodeau, Thomas & Wachter, Susan, 2001. "Anisotropic Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 5-30, July.
- Kevin Gillen & Thomas Thibodeau & Susan Wachter, "undated". "Anistropic Autocorrelation in House Prices," Zell/Lurie Center Working Papers 383, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
- Karl E. Case & Robert J. Shiller, 1988. "The Efficiency of the Market for Single-Family Homes," NBER Working Papers 2506, National Bureau of Economic Research, Inc.
- Andrew Caplin & Sewin Chan & Charles Freeman & Joseph Tracy, 1997. "Housing Partnerships: A New Approach to a Market at a Crossroads," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032430, July.
- Deng, Yongheng & Quigley, John M. & Van Order, Robert & Mac, Freddie, 1996. "Mortgage default and low downpayment loans: The costs of public subsidy," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 263-285, June.
- Yongheng Deng & John M. Quigley & Robert Van Order, 1995. "Mortgage Default and Low Downpayment Loans: The Costs of Public Subsidy," NBER Working Papers 5184, National Bureau of Economic Research, Inc.
- Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273.
- Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," NBER Working Papers 3368, National Bureau of Economic Research, Inc.
- Terrence M. Clauretie, 1987. "The Impact of Interstate Foreclosure Cost Differences and the Value of Mortgages on Default Rates," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(3), pages 152-167. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ire:issued:v:08:n:01:2005:p:27-43. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IRER Secretary Office/Webmaster)
If references are entirely missing, you can add them using this form.