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Ripple effect and contagious effect in the US regional housing markets

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  • Ming-Chu Chiang

    (National Yunlin University of Science and Technology)

  • I-Chun Tsai

    (National University of Kaohsiung)

Abstract

The existing researches show that the relationships across regional housing market in the USA are asymmetric, and the ripple effect may exist among regional housing markets. To study the ripple effect among regional housing market, this research uses vector autoregression model, Granger causality test and the forecast error variance decomposition to study the relationships within regional and cross-regional housing markets. Besides, this research also uses copula model to inspect the contagious effects between regional housing markets. The main empirical results show that, first, among the metropolitans under studied, Los Angeles in western region, New York in eastern region and Miami in southern region are the source of shock in their respective region. Second, apart from those in southern region, conditional contagious effects between regional housing markets are dynamic during the study period and there exist obvious contagious effect during the period of global financial crises started from 2008 to 2009. Third, contagious effects are more significant within the same region but less obvious in cross-regional housing markets. We also found that housing price comovement in down markets are rare to observe than housing price comovements in up markets.

Suggested Citation

  • Ming-Chu Chiang & I-Chun Tsai, 2016. "Ripple effect and contagious effect in the US regional housing markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 55-82, January.
    • Handle: RePEc:spr:anresc:v:56:y:2016:i:1:d:10.1007_s00168-015-0718-5
    DOI: 10.1007/s00168-015-0718-5
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    3. Ming-Chu Chiang & I-Chun Tsai, 2020. "Importance of Proper Monetary Liquidity: Sustainable Development of the Housing and Stock Markets," Sustainability, MDPI, vol. 12(21), pages 1-20, October.
    4. Gabauer, David & Gupta, Rangan & Marfatia, Hardik A. & Miller, Stephen M., 2024. "Estimating U.S. housing price network connectedness: Evidence from dynamic Elastic Net, Lasso, and ridge vector autoregressive models," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 349-362.
    5. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2021. "A regional decomposition of US housing prices and volume: market dynamics and Portfolio diversification," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(2), pages 279-307, April.
    6. I-Chun Tsai, 2019. "Interregional correlations in the US housing market at three price tiers," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(1), pages 1-24, August.
    7. I-Chun Tsai, 2018. "The cause and outcomes of the ripple effect: housing prices and transaction volume," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 351-373, September.
    8. Jin Hu & Xuelei Xiong & Yuanyuan Cai & Feng Yuan, 2020. "The Ripple Effect and Spatiotemporal Dynamics of Intra-Urban Housing Prices at the Submarket Level in Shanghai, China," Sustainability, MDPI, vol. 12(12), pages 1-17, June.
    9. James E. Payne & Xiaojin Sun, 2023. "Time‐varying connectedness of metropolitan housing markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 470-502, March.
    10. John Muellbauer, 2019. "A Tale of Two Cities: Is Overvaluation a Capital Issue?," Springer Books, in: Rob Nijskens & Melanie Lohuis & Paul Hilbers & Willem Heeringa (ed.), Hot Property, chapter 0, pages 51-62, Springer.
    11. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2019. "A Regional Decomposition of US Housing Prices and Volume: Market Dynamics and Economic Diversification Opportunities," Working Papers in Economics & Finance 2019-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    12. Chang, Kuang-Liang, 2020. "An investigation on mixed housing-cycle structures and asymmetric tail dependences," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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