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Are Housing Price Cycles Asymmetric? Evidence from the US States and Metropolitan Areas

Author

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  • Christophe Andre

    (Economics Department, Organisation for Economic Co-operation and Development (OECD), 75775 Paris, Cedex 16, France)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • John W. Muteba Mwamba

    (Faculty of Economic and Financial Sciences, University of Johannesburg, P.O. Box 524, Auckland Park 2006, South Africa)

Abstract

This paper investigates asymmetry in US housing price cycles at the state and metropolitan statistical area (MSA) level, using the Triples test (Randles et al., 1980). Several reasons may account for asymmetry in housing prices, including non-linearity in their determinants and in behavioural responses, in particular linked to equity constraints and loss aversion. However, few studies have formally tested the symmetry of housing price cycles. Evidence of asymmetry at the 5% confidence level is found in nearly half of the states, 37% of the MSAs and in the aggregate national series. Geographical patterns and comparisons with results obtained by Cook (2006) for the United Kingdom suggest that asymmetric cycles tend to prevail in areas where housing supply elasticity is low. In addition, asymmetric cycles with steep downturns are found in several states of the Midwest, where the decline in traditional industries has severely hit the economy. These results call for considering potential non-linearity when analysing, modelling and forecasting housing prices.

Suggested Citation

  • Christophe Andre & Rangan Gupta & John W. Muteba Mwamba, 2016. "Are Housing Price Cycles Asymmetric? Evidence from the US States and Metropolitan Areas," Working Papers 201635, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201635
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    Cited by:

    1. Christophe André & Nikolaos Antonakakis & Rangan Gupta & Mulatu F. Zerihun, 2017. "Asymmetric Behaviour in Nominal and Real Housing Prices: Evidence from Advanced and Emerging Economies," Working Papers 201711, University of Pretoria, Department of Economics.
    2. 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.
    3. Rangan Gupta & Chi Keung Marco Lau & Wendy Nyakabawo, 2018. "Predicting Aggregate and State-Level US House Price Volatility: The Role of Sentiment," Working Papers 201866, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    Asymmetry; House Prices; US Economy;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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