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The Economic Drivers of Differences in House Price Inflation Rates across MSAs

Listed author(s):
  • Fuess, Roland

    ()

  • Zietz, Joachim

    ()

This study examines why monetary policy at the national level can have vastly different effects on appreciation rates of single family houses across metropolitan statistical areas (MSAs). The study employs Case/Shiller monthly house price index data for 19 MSAs from 1992:06 to 2014:12 and FHFA quarterly house price index data for 94 MSAs from 1992:3 to 2014:4. We model the importance of MSA-specific demand and supply characteristics through a set of interaction terms between these factors and monetary policy. The empirical analysis is cast in terms of a state-space approach with a stochastic trend component to absorb the impact of omitted variables. Robustness checks use panel data estimators with interaction terms. A lower federal funds rate is associated with home price run-ups in MSAs that are characterized by higher demand and tighter supply conditions.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1526.pdf
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Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1526.

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Length: 46 pages
Date of creation: Dec 2015
Handle: RePEc:usg:sfwpfi:2015:26
Contact details of provider: Phone: +41 71 243 40 11
Fax: +41 71 243 40 40
Web page: http://www.unisg.ch/de/universitaet/schools/finance

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