Is there a national housing market bubble brewing in the United States?

Gupta, Rangan, Ma, Jun, Theodoridis, Konstantinos ORCID: https://orcid.org/0000-0002-4039-3895 and Wohar, Mark E. 2023. Is there a national housing market bubble brewing in the United States? Macroeconomic Dynamics 27 (8) , pp. 2191-2228. 10.1017/S1365100522000645

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Abstract

We use a time-varying parameter dynamic factor model with stochastic volatility estimated using Bayesian methods to disentangle the relative importance of the common component in Federal Housing Finance Agency house price movements from state-specific shocks, over the quarterly period of 1975Q2 to 2017Q4. We find that the contribution of the national factor in explaining fluctuations in house prices is critical. We then use a Bayesian change-point vector autoregressive model that allows for different regimes throughout the sample period, to study the impact of aggregate supply, aggregate demand, (conventional) monetary policy, and term-spread shocks, identified based on sign restrictions on the national component of house price movements. While monetary policy and other shocks are found to be quite dominant early on, we find evidence that the national factor has been detached from the identified macroeconomic shocks since 2014, thus suggesting that a “national bubble” might be brewing again in the US housing market.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Publisher:	Cambridge University Press (CUP)
ISSN:	1365-1005
Date of First Compliant Deposit:	23 May 2022
Date of Acceptance:	23 May 2022
Last Modified:	10 Nov 2024 00:45
URI:	https://orca.cardiff.ac.uk/id/eprint/149971

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