U.S. Regional Housing Bubbles, Their Co-Movements and Spillovers

39 Pages Posted: 10 Jul 2011  

Roland Füss

University of St. Gallen - School of Finance

Bing Zhu

EBS Universität für Wirtschaft und Recht - EBS Business School; University of Regensburg - International Real Estate Business School (IREBS)

Joachim Zietz

EBS University, EBS Business School

Date Written: July 9, 2011

Abstract

This paper provides empirical evidence for co-movement and spillover effects of regional housing bubbles and their diffusion channels. In our two-stage identification strategy, we first decompose the observed housing price into a fundamental and a bubble component. We then analyze the interdependence among these regional bubble series using spatial econometric methods. The empirical results indicate that a regional bubble first affects the adjacent regions via geographical proximity. Spillover effects reinforce the influence on adjacent regions. Similar economic and mortgage market conditions help spread the bubble across regions. We conclude that a regional housing bubble is of more than regional interest because it may infect numerous other regions and also cause nationwide problems through wealth and multiplier effects.

Keywords: Housing price bubble, co-movement, spillover effects, state-space modeling, dynamic space-time model

JEL Classification: C21, C23, R15

Suggested Citation

Füss, Roland and Zhu, Bing and Zietz, Joachim, U.S. Regional Housing Bubbles, Their Co-Movements and Spillovers (July 9, 2011). Available at SSRN: https://ssrn.com/abstract=1882284 or http://dx.doi.org/10.2139/ssrn.1882284

Roland Füss (Contact Author)

University of St. Gallen - School of Finance ( email )

Rosenbergstrasse 52
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Bing Zhu

EBS Universität für Wirtschaft und Recht - EBS Business School ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden
Germany

University of Regensburg - International Real Estate Business School (IREBS) ( email )

Universitaetsstrasse 31
Regenburg, Bavaria 93040
Germany

Joachim Zietz

EBS University, EBS Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

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