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Persistence and cyclical dynamics of US and UK house prices: Evidence from over 150 years of data

Author

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  • Giorgio Canarella

    (University of Nevada, Las Vegas, USA)

  • Luis Gil-Alana

    (University of Navarra, Spain, and Universidad Francisco de Vitoria, Spain)

  • Rangan Gupta

    (University of Pretoria, South Africa)

  • Stephen M Miller

    (University of Nevada, Las Vegas, USA)

Abstract

This paper provides a new and unique look at the dynamics and persistence of historical house prices in the USA and the UK using fractional integration techniques not previously applied to housing markets. Unlike previous research, we consider two components of persistence of house prices: the component associated with the long-run trend and the component associated with the cycle. We find evidence of cyclical and long-run persistence in the UK housing markets. In contrast, we fail to find evidence of cyclical persistence for the USA. For the sub-samples, which account for a structural break in each series, an important difference is the asynchronous pattern of the breaks, an indication of heterogeneity in the house price dynamics of the two countries and a sign that national rather than global events have played an important role. Although the house price movements of the last decade are dramatic, the greatest structural changes in the overall nominal and real price dynamics of the UK and the USA appear to have taken place much earlier, in the late 1970s and early 1980s in the UK and in the mid-1950s and early 1970s in the USA. An important result, common to the whole and sub-samples, is that long-run persistence plays a greater role than cyclical persistence in explaining the dynamics of house prices in both countries. These findings have substantial implications for policy decisions.

Suggested Citation

  • Giorgio Canarella & Luis Gil-Alana & Rangan Gupta & Stephen M Miller, 2021. "Persistence and cyclical dynamics of US and UK house prices: Evidence from over 150 years of data," Urban Studies, Urban Studies Journal Limited, vol. 58(1), pages 53-72, January.
  • Handle: RePEc:sae:urbstu:v:58:y:2021:i:1:p:53-72
    DOI: 10.1177/0042098019872691
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    Cited by:

    1. Guglielmo Maria Caporale & Luis Alberiko Gil-Alana, 2023. "U.S. House Prices by Census Division: Persistence, Trends and Structural Breaks," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(1), pages 79-90, May.
    2. Guglielmo Maria Caporale & Luis Alberiko Gil-Alana, 2023. "Long-Run Trends and Cycles in US House Prices," CESifo Working Paper Series 10751, CESifo.
    3. Abebe Hailemariam & Sefa Awaworyi Churchill & Russell Smyth & Kingsley Tetteh Baako, 2021. "Income inequality and housing prices in the very long‐run," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 295-321, July.

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    Keywords

    cyclical behaviour; fractional integration; house prices; persistence;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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