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Housing Investment and the U.S. Economy: How Have the Relationships Changed?

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  • William Miles

    () (Wichita State University)

Abstract

Previous research has found that housing investment has a disproportionate role in the U.S. business cycle. This paper demonstrates that the relationship between housing and the rest of the economy has changed since financial deregulation and innovation in the early1980s. In particular, residential investment increases both consumption, as well as non-residential investment palpably more than in years past. Additionally, in the pre-deregulation years, non-residential investment appeared to crowd out housing activity. However, the results indicate that this effect is smaller in the present era than before the early 1980s, in all likelihood due to the switch from thrift-based financing of home mortgages to the current system in which secondary mortgage markets play a predominant role.

Suggested Citation

  • William Miles, 2009. "Housing Investment and the U.S. Economy: How Have the Relationships Changed?," Journal of Real Estate Research, American Real Estate Society, vol. 31(3), pages 329-350.
  • Handle: RePEc:jre:issued:v:31:n:3:2009:p:329-350
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    References listed on IDEAS

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    1. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
    2. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    3. Dynan, Karen E. & Elmendorf, Douglas W. & Sichel, Daniel E., 2006. "Can financial innovation help to explain the reduced volatility of economic activity?," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 123-150, January.
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    5. Bradley, Michael G & Gabriel, Stuart A & Wohar, Mark E, 1995. "The Thrift Crisis, Mortgage-Credit Intermediation, and Housing Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 476-497, May.
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    9. Richard K. Green, 1997. "Follow the Leader: How Changes in Residential and Non-residential Investment Predict Changes in GDP," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(2), pages 253-270.
    10. Ronald W. Kaiser, 1997. "The Long Cycle of Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 14(3), pages 233-258.
    11. Edwin S. Mills, 1987. "Has the United States Overinvested in Housing?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(1), pages 601-616.
    12. N. Edward Coulson & Myeong-Soo Kim, 2000. "Residential Investment, Non-residential Investment and GDP," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(2), pages 233-247.
    13. Paul R. Goebel & Christopher K. Ma, 1993. "The Integration of Mortgage Markets and Capital Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(4), pages 511-538.
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    Cited by:

    1. repec:gam:jsusta:v:8:y:2016:i:1:p:66:d:62235 is not listed on IDEAS
    2. Jarl G. Kallberg & Crocker H. Liu & Paolo Pasquariello, 2014. "On the Price Comovement of U.S. Residential Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(1), pages 71-108, March.
    3. repec:erc:cypepr:v:11:y:2017:i:1:p:69-82 is not listed on IDEAS

    More about this item

    JEL classification:

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

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