House price dynamics and their reaction to macroeconomic changes

Ogonna Nneji; Chris Brooks; Charles W.R. Ward

doi:10.1016/j.econmod.2013.02.007

House price dynamics and their reaction to macroeconomic changes

Ogonna Nneji, Chris Brooks, Charles W.R. Ward

School of Accounting and Finance - Business School

Research output: Contribution to journal › Article (Academic Journal) › peer-review

56 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	172-178
Number of pages	7
Journal	Economic Modelling
Volume	32
DOIs	https://doi.org/10.1016/j.econmod.2013.02.007
Publication status	Published - 1 May 2013

Keywords

House prices
Monetary policy
Markov switching model
Macroeconomic drivers

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title = "House price dynamics and their reaction to macroeconomic changes",

abstract = "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.",

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AU - Nneji, Ogonna

AU - Brooks, Chris

AU - Ward, Charles W.R.

PY - 2013/5/1

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N2 - 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.

AB - 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.

KW - House prices

KW - Monetary policy

KW - Markov switching model

KW - Macroeconomic drivers

U2 - 10.1016/j.econmod.2013.02.007

DO - 10.1016/j.econmod.2013.02.007

M3 - Article (Academic Journal)

SN - 0264-9993

VL - 32

SP - 172

EP - 178

JO - Economic Modelling

JF - Economic Modelling

ER -

House price dynamics and their reaction to macroeconomic changes

Abstract

Keywords

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