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Time-Varying Spillovers between Housing Sentiment and Housing Market in the United States

Author

Listed:
  • Christophe Andre

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

  • David Gabauer

    (Data Analysis Systems, Software Competence Center Hagenberg, Hagenberg, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

This paper investigates spillovers between the housing sentiment index of Bork et al. (2020), common factors in US real housing returns and their volatility (derived from a time-varying dynamic factor model with stochastic volatility), GDP growth and real interest rates, using the time-varying parameter vector autoregressive version of the Diebold and Yilmaz (2012, 2014) methodology. We find that in contrast to spillovers from the common factor in housing returns, reverse spillovers are relatively weak. Net spillovers from the common factor of housing returns to housing sentiment and GDP increase durably after the Global Financial Crisis. This suggests that, while a shock to housing prices is likely to have a significant impact on housing sentiment and the economy, a purely exogenous shock to housing sentiment, may in itself have little impact on housing returns and volatility.

Suggested Citation

  • Christophe Andre & David Gabauer & Rangan Gupta, 2020. "Time-Varying Spillovers between Housing Sentiment and Housing Market in the United States," Working Papers 202091, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202091
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    More about this item

    Keywords

    Common Housing Market Movements; Sentiment; Time-Varying Spillovers;
    All these keywords.

    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
    • 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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