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A Nationwide or Localized Housing Crisis? Evidence from Structural Instability in US Housing Price and Volume Cycles

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  • MeiChi Huang

    (National Taipei University)

Abstract

This study provides fresh implications for the puzzle of the recent housing boom-bust cycle in the United States. It extracts housing factors from housing price and volume time series at state and regional levels under a dynamic factor model, which considers three varieties of structural instability in local housing markets. The findings suggest that state-level housing price cycles are more unstable than housing volume cycles, and the probability of rejecting stability for the Northeast is the highest among four regional housing markets. In general, the housing market forecasts based on 1988–2012 full-sample factors and time-varying coefficients across pre- and post-1999 subperiods are superior to alternatives. The factor-based forecast results provide new evidence for a nationwide housing crisis in 2007–2008, and thus suggest possible effectiveness of monetary policies in stabilizing recent housing boom-bust cycles.

Suggested Citation

  • MeiChi Huang, 2019. "A Nationwide or Localized Housing Crisis? Evidence from Structural Instability in US Housing Price and Volume Cycles," Computational Economics, Springer;Society for Computational Economics, vol. 53(4), pages 1547-1563, April.
    • Handle: RePEc:kap:compec:v:53:y:2019:i:4:d:10.1007_s10614-018-9822-9
    DOI: 10.1007/s10614-018-9822-9
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    Cited by:

    1. Gupta, Rangan & Ma, Jun & Theodoridis, Konstantinos & Wohar, Mark E, 2020. "Is there a National Housing Market Bubble Brewing in the United States?," Cardiff Economics Working Papers E2020/3, Cardiff University, Cardiff Business School, Economics Section.
    2. Balcilar, Mehmet & Gupta, Rangan & Sousa, Ricardo M. & Wohar, Mark E., 2021. "Linking U.S. State-level housing market returns, and the consumption-(Dis)Aggregate wealth ratio," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 779-810.
    3. Arsova, Antonia & Karaman Örsal, Deniz Dilan, 2021. "A panel cointegrating rank test with structural breaks and cross-sectional dependence," Econometrics and Statistics, Elsevier, vol. 17(C), pages 107-129.

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