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Volatility Clustering in U.S. Home Prices

Author

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  • William Miles

    (Wichita State University Wichita, KS 67260-0078)

Abstract

Generalized autoregressive conditional heteroscedasticity (GARCH) effects imply the probability of large losses is greater than standard mean-variance analysis suggests. Accurately capturing GARCH for housing markets is vital for portfolio management. Previous investigations of GARCH in housing have focused on narrow regions or aggregated effects of GARCH across markets, imposing one nationwide effect. This paper tests fifty state housing markets for GARCH, and develops individual GARCH models for those states, allowing for different effects in each. Results indicate there are GARCH effects in over half the states, and the signs and magnitudes vary widely, highlighting the importance of estimating separate GARCH models for each market.

Suggested Citation

  • William Miles, 2008. "Volatility Clustering in U.S. Home Prices," Journal of Real Estate Research, American Real Estate Society, vol. 30(1), pages 73-90.
    • Handle: RePEc:jre:issued:v:30:n:1:2008:p:73-90
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    Citations

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    Cited by:

    1. Mawuli Segnon & Rangan Gupta & Keagile Lesame & Mark E. Wohar, 2021. "High-Frequency Volatility Forecasting of US Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 62(2), pages 283-317, February.
    2. Kuang-Liang Chang & Charles Ka Yui Leung, 2022. "How did the asset markets change after the Global Financial Crisis?," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 12, pages 312-336, Edward Elgar Publishing.
    3. Bruce Morley & Dennis Thomas, 2018. "Covariance Risk and the Ripple Effect in the UK Regional Housing Market," Review of Economics & Finance, Better Advances Press, Canada, vol. 13, pages 1-13, August.
    4. Bruce Morley & Dennis Thomas, 2016. "An Empirical Analysis of UK House Price Risk Variation by Property Type," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 45-56, May.
    5. Christidou Maria & Fountas Stilianos, 2018. "Uncertainty in the housing market: evidence from US states," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(2), pages 1-17, April.
    6. Rangan Gupta & Hardik A. Marfatia & Christian Pierdzioch & Afees A. Salisu, 2022. "Machine Learning Predictions of Housing Market Synchronization across US States: The Role of Uncertainty," The Journal of Real Estate Finance and Economics, Springer, vol. 64(4), pages 523-545, May.
    7. Nicholas Apergis & James E. Payne, 2020. "Modeling the time varying volatility of housing returns: Further evidence from the U.S. metropolitan condominium markets," Review of Financial Economics, John Wiley & Sons, vol. 38(1), pages 24-33, January.
    8. Chyi Lin Lee, 2009. "Housing price volatility and its determinants," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 2(3), pages 293-308, August.
    9. Deng, Yongheng & Girardin, Eric & Joyeux, Roselyne, 2018. "Fundamentals and the volatility of real estate prices in China: A sequential modelling strategy," China Economic Review, Elsevier, vol. 48(C), pages 205-222.
    10. William Miles, 2011. "Long-Range Dependence in U.S. Home Price Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 42(3), pages 329-347, April.
    11. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.
    12. Kishor, N. Kundan & Kumari, Swati & Song, Suyong, 2015. "Time variation in the relative importance of permanent and transitory components in the U.S. housing market," Finance Research Letters, Elsevier, vol. 12(C), pages 92-99.
    13. Yuan Zhang & Yiguo Sun & Thanasis Stengos, 2019. "Spatial Dependence in the Residential Canadian Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 223-263, February.
    14. Paraskevi Katsiampa & Kyriaki Begiazi, 2019. "An empirical analysis of the Scottish housing market by property type," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 559-583, September.
    15. Chow Sheung-Chi & Cunado Juncal & Gupta Rangan & Wong Wing-Keung, 2018. "Causal relationships between economic policy uncertainty and housing market returns in China and India: evidence from linear and nonlinear panel and time series models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(2), pages 1-15, April.
    16. Azimi, Mohammad Naim, 2015. "Modelling the Clustering Volatility of India's Wholesales Price Index and the Factors Affecting it," MPRA Paper 70267, University Library of Munich, Germany.
    17. Rangan Gupta & Hardik A. Marfatia & Eric Olson, 2020. "Effect of uncertainty on U.S. stock returns and volatility: evidence from over eighty years of high-frequency data," Applied Economics Letters, Taylor & Francis Journals, vol. 27(16), pages 1305-1311, September.
    18. Rangan Gupta & Chi Keung Marco Lau & Wendy Nyakabawo, 2018. "Predicting Aggregate and State-Level US House Price Volatility: The Role of Sentiment," Working Papers 201866, University of Pretoria, Department of Economics.
    19. Chyi Lin Lee, 2017. "An examination of the risk-return relation in the Australian housing market," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(3), pages 431-449, June.
    20. Hong Miao & Sanjay Ramchander & Marc W. Simpson, 2011. "Return and Volatility Transmission in U.S. Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 701-741, December.
    21. Chang, Kuang-Liang, 2010. "House price dynamics, conditional higher-order moments, and density forecasts," Economic Modelling, Elsevier, vol. 27(5), pages 1029-1039, September.
    22. Kyungwon Kim & Jae Wook Song, 2020. "Detecting Possible Reduction of the Housing Bubble in Korea for Different Residential Types and Regions," Sustainability, MDPI, vol. 12(3), pages 1-31, February.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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