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Housing price–volume correlations and boom–bust cycles

Author

Listed:
  • Chien-Chiang Lee

    () (National Sun Yat-sen University)

  • Chin-Yu Wang

    () (Takming University of Science and Technology)

  • Jhih-Hong Zeng

    () (National Sun Yat-sen University)

Abstract

Abstract This paper investigates the housing price–volume nexus based on different levels of liquidity for the US new one-family housing market over the period between January 1963 and November 2009. We mainly analyze the differential responses of trading volumes to housing price changes (denoted as price elasticity), employing a quantile cointegrating approach that allows us to capture housing boom–bust cycles earlier. In addition, we also explore the long-term impacts of monetary policies on housing sales. According to our findings, the price elasticities perform differently across the booms and busts of housing markets. Shifts in price elasticities can transmit signals of oncoming upturns, recovery, and downturns of housing cycles, which possibly relate to the business cycle. On the other hand, a contractionary monetary policy exerts a much effective control over an overheated housing market, but an expansionary monetary policy has a relatively small influence on stimulating a depressed housing market. Our findings offer some important suggestions and policy implications.

Suggested Citation

  • Chien-Chiang Lee & Chin-Yu Wang & Jhih-Hong Zeng, 2017. "Housing price–volume correlations and boom–bust cycles," Empirical Economics, Springer, vol. 52(4), pages 1423-1450, June.
  • Handle: RePEc:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1101-9
    DOI: 10.1007/s00181-016-1101-9
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    Keywords

    Housing price; Housing trading volume; Nonlinear relationship; Quantile cointegration; Momentum; cycle;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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