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Modeling regional house prices

Author

Listed:
  • van Dijk, A.
  • Franses, Ph.H.B.F.
  • Paap, R.
  • van Dijk, D.J.C.

Abstract

We develop a parsimonious panel model for quarterly regional house prices, for which both the cross-section and the time series dimension is large. The model allows for stochastic trends, cointegration, cross-equation correlations and, most importantly, latent-class clustering of regions. Class membership is fully data-driven and based on (i) average growth rates of house prices, (ii) the propagation of shocks to house prices across regions, also known as the ripple effect, and (iii) the relationship of house prices with economic growth and other variables. Applying the model to quarterly data for the Netherlands, we find convincing evidence for the existence of two distinct clusters of regions, with pronounced differences in house price dynamics.

Suggested Citation

  • van Dijk, A. & Franses, Ph.H.B.F. & Paap, R. & van Dijk, D.J.C., 2007. "Modeling regional house prices," Econometric Institute Research Papers EI 2007-55, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:11723
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    Cited by:

    1. Holly, Sean & Hashem Pesaran, M. & Yamagata, Takashi, 2011. "The spatial and temporal diffusion of house prices in the UK," Journal of Urban Economics, Elsevier, vol. 69(1), pages 2-23, January.
    2. Ling Zhang & He Wang & Yan Song & Haizhen Wen, 2019. "Spatial Spillover of House Prices: An Empirical Study of the Yangtze Delta Urban Agglomeration in China," Sustainability, MDPI, vol. 11(2), pages 1-17, January.
    3. Guancen Wu & Wenjing Guo & Xing Niu, 2023. "Spillover effect analysis of home-purchase limit policy on housing prices in large and medium-sized cities: Evidence from China," PLOS ONE, Public Library of Science, vol. 18(1), pages 1-17, January.
    4. Dominik Blatt & Kausik Chaudhuri & Hans Manner, 2021. "Spillover in the UK Housing Market," Graz Economics Papers 2021-13, University of Graz, Department of Economics.
    5. James D. Hamilton & Michael T. Owyang, 2012. "The Propagation of Regional Recessions," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 935-947, November.
    6. Katharina Pijnenburg, 2013. "The Spatial Dimension of US House Price Developments," Discussion Papers of DIW Berlin 1270, DIW Berlin, German Institute for Economic Research.
    7. Roel Helgers & Erik Buyst, 2016. "Spatial and Temporal Diffusion of Housing Prices in the Presence of a Linguistic Border: Evidence from Belgium," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(1), pages 92-122, March.
    8. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series 2013012, Norface Research Programme on Migration, Department of Economics, University College London.
    9. Cipollini, Andrea & Parla, Fabio, 2020. "Housing market shocks in italy: A GVAR approach," Journal of Housing Economics, Elsevier, vol. 50(C).
    10. Tavassoli, Solaleh & Khiabani, Nasser, 2023. "Spatio-Temporal Diffusion of Housing Prices in Iran (in Persian)," The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), Institute for Management and Planning studies, vol. 28(3), pages 3-42, December.
    11. Katharina Pijnenburg, 2017. "The spatial dimension of US house prices," Urban Studies, Urban Studies Journal Limited, vol. 54(2), pages 466-481, February.
    12. Katharina Pijnenburg, 2014. "The Spatial Dimension of US House Price Developments," ERSA conference papers ersa14p127, European Regional Science Association.
    13. Maureen Lankhuizen & Thomas De Graaff & Henri De Groot, 2012. "Product Heterogeneity, Intangible Barriers & Distance Decay: The effect of multiple dimensions of distance on trade across different product categories," ERSA conference papers ersa12p151, European Regional Science Association.
    14. Osman Dou{g}an & Raffaele Mattera & Philipp Otto & Suleyman Tac{s}p{i}nar, 2024. "A Dynamic Spatiotemporal and Network ARCH Model with Common Factors," Papers 2410.16526, arXiv.org.
    15. Sergei S. Shibaev, 2016. "Recession Propagation In Small Regional Economies: Spatial Spillovers And Endogenous Clustering," Working Paper 1369, Economics Department, Queen's University.
    16. Mattera, Raffaele & Franses, Philip Hans, 2025. "Forecasting house price growth rates with factor models and spatio-temporal clustering," International Journal of Forecasting, Elsevier, vol. 41(1), pages 398-417.
    17. Zhu, Bing & van Dijk, Dorinth & Lizieri, Colin, 2024. "Price diffusion across international private commercial real estate markets," Journal of International Money and Finance, Elsevier, vol. 140(C).
    18. Maureen B. M. Lankhuizen & Thomas De Graaff & Henri L. F. de Groot, 2015. "Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade across Different Product Categories," Spatial Economic Analysis, Taylor & Francis Journals, vol. 10(2), pages 137-159, June.

    More about this item

    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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