House price dynamics and their reaction to macroeconomic changes

Nneji, O., Brooks, C. ORCID: https://orcid.org/0000-0002-2668-1153 and Ward, C. W.R. (2013) House price dynamics and their reaction to macroeconomic changes. Economic Modelling, 32. pp. 172-178. ISSN 0264-9993 doi: 10.1016/j.econmod.2013.02.007

Abstract/Summary

This article applies a three-regime Markov switching model to investigate the impact of the macroeconomy on the dynamics of the residential real estate market in the US. Focusing on the period between 1960 and 2011, the methodology implemented allows for a clearer understanding of the drivers of the real estate market in “boom”, “steady-state” and “crash” regimes. Our results show that the sensitivity of the real estate market to economic changes is regime-dependent. The paper then proceeds to examine whether policymakers are able to influence a regime switch away from the crash regime. We find that a decrease in interest rate spreads could be an effective catalyst to precipitate such a change of state.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/31493
Item Type	Article
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Uncontrolled Keywords	House prices; Monetary policy; Markov switching model; Macroeconomic drivers
Publisher	Elsevier
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