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House Price Dynamics and Excess Risk

Author

Listed:
  • Yuming Li

    (California State University at Fullerton)

  • Jing Yang

    (California State University at Fullerton)

Abstract

We examine the relation between risk and returns in the U.S. residential housing market. We find that the risk of house price changes and the magnitude relative to the risk of income changes vary with economic conditions. We measure the excess risk of house price changes by adjusting for the risk of income changes and economic variables associated with the real estate and financial sectors of the economy, and find a significant and positive relation between house price changes and excess risk. We also find that excess risk has significantly adverse effects on the short-run momentum and long-run reversal of house price changes across metro areas, thus implying that excess risk induces price rigidity and helps to explain for the serial correlations in price changes in the U.S. single-family housing market.

Suggested Citation

  • Yuming Li & Jing Yang, 2018. "House Price Dynamics and Excess Risk," International Real Estate Review, Global Social Science Institute, vol. 21(2), pages 251-274.
    • Handle: RePEc:ire:issued:v:21:n:02:2018:p:251-274
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    References listed on IDEAS

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    Cited by:

    1. Antoine Giannetti, 2021. "Home Sales Pair Counts: The Organic Metric for Trading Volume in Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 610-634, June.

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    More about this item

    Keywords

    Cross-Sectional Dispersion; Idiosyncratic Risk; Serial Correlations; House Price Movements;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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