Abstract
This study explores price dynamics and price relationships in the US housing market with a focus on four regions: Northeast, Midwest, South, and West. It applies a multivariate state-space model to identify the common trends and common cycles in US regional markets. The study finds that the principal source of secular price variability in the Northeast and West markets is due to two common stochastic trends, while a large share of transitional price variability in the Northeast, West and Midwest originates from three common stochastic cycles. The study estimates the relationships between the common unobserved components and economic variables and finds that unemployment, federal funds rate, corporate default risk, economic expansion, unanticipated inflation in the construction market are significant underlying economic phenomena that impact the evolution of the common movements in both the short run and the long run housing dynamics.
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Acknowledgements
We thank the discussants at the 2007 Eastern Economic Association Annual Conference in New York, NY and the 2007 American Real Estate and Urban Economics Association International Conference in Macau, China for helpful comments and suggestions.
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Fadiga, M.L., Wang, Y. A multivariate unobserved component analysis of US housing market. J Econ Finance 33, 13–26 (2009). https://doi.org/10.1007/s12197-008-9027-5
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DOI: https://doi.org/10.1007/s12197-008-9027-5