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The Heterogeneous Impact of Temperature Growth on Real House Price Returns across the US States

Author

Listed:
  • Renee van Eyden

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Geoffrey Ngene

    (Stetson-Hatcher School of Business (SHSB), Mercer University, 1501 Mercer University Drive, Macon, GA 32107, USA)

  • Oguzhan Cepni

    (Copenhagen Business School, Department of Economics, Porcelaenshaven 16A, Frederiksberg DK-2000, Denmark; Central Bank of the Republic of Turkey, Haci Bayram Mah. Istiklal Cad. No:10 06050, Ankara, Turkey)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

This paper investigates the impact of temperature growth on real returns of US housing markets at the state level. Using the 1-month, 3-month, and 12-month horizons for the period 1975:01 to 2021:06 and heterogeneous random coefficients panel data model, we find that increased temperature growth rates negatively affect real house price returns across all horizons. The effects intensify when the media refers more to climate change news. While most states experience a decline in real house price returns at a 3-month horizon, the largest relative negative impacts are registered over the 12-month horizon, suggesting that climate risk is a long-run risk. Geographically, the rising temperatures have the most negative effect on real house returns in the US West Coast states of California, Arizona, Nevada, and Idaho, and the Sun Belt states, most notably Florida, Georgia, Texas, Tennessee, and Alabama. The results remain robust after controlling for state-level leading economic indicators and state- and national-level economic uncertainty arising from policy changes.

Suggested Citation

  • Renee van Eyden & Geoffrey Ngene & Oguzhan Cepni & Rangan Gupta, 2022. "The Heterogeneous Impact of Temperature Growth on Real House Price Returns across the US States," Working Papers 202236, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:202236
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    More about this item

    Keywords

    Climate Risks; Temperature Growth; Panel Random Coefficient Model; US States;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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