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Clustered housing cycles

  • Hernández-Murillo, Rubén

    ()

    (Federal Reserve Bank of Cleveland)

  • Owyang, Michael T.

    ()

    (Federal Reserve Bank of St. Louis)

  • Rubio, Margarita

Using a panel of U.S. city-level building permits data, we estimate a Markov-switching model of housing cycles that allows for idiosyncratic departures from a national housing cycle. These departures occur for clusters of cities that experience simultaneous housing contractions. We find that cities do not form housing regions in the traditional geographic sense. Instead, similarities in factors affecting the demand for housing (such as average winter temperature and the unemployment rate) appear to be more important determinants of cyclical comovements than similarities in factors affecting the supply for housing (such as housing density and the availability of developable land).

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2013-021.

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Length: 41 pages
Date of creation: 2013
Date of revision: 23 Sep 2015
Handle: RePEc:fip:fedlwp:2013-021
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  4. Frühwirth-Schnatter, Sylvia & Kaufmann, Sylvia, 2004. "Model-based Clustering of Multiple Time Series," CEPR Discussion Papers 4650, C.E.P.R. Discussion Papers.
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  8. Owyang, Michael T. & Piger, Jeremy M. & Wall, Howard J. & Wheeler, Christopher H., 2008. "The economic performance of cities: A Markov-switching approach," Journal of Urban Economics, Elsevier, vol. 64(3), pages 538-550, November.
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  23. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1253-1296.
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