On the Price Comovement of U.S. Residential Real Estate Markets

Real Estate Economics, Forthcoming

Posted: 7 Aug 2012

See all articles by Jarl G. Kallberg

Jarl G. Kallberg

New York University (NYU) - Department of Finance

Crocker Herbert Liu

Cornell University - School of Hotel Administration

Paolo Pasquariello

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 7, 2012

Abstract

We investigate the comovement among Case-Shiller Home Price Indices for 14 metropolitan areas between 1992 and 2008. We define the portion of this comovement deemed as fundamental (excessive) as the covariation that can (cannot) be attributed to common fundamental factors directly influencing real estate prices. We find that i) comovement among these markets considerably increased over the sample period, especially in the late 1990s; ii) this increase is mostly attributable to underlying systematic real and financial factors, consistent with a greater fundamental integration of those markets; and iii) excess comovement is a less important factor than commonly believed. We discuss the implications of these results for the evolution of U.S. real estate prices over the last two decades and the ongoing credit crisis.

Keywords: Real Estate, Correlation, Contagion, Housing Bubble, Credit Crisis

Suggested Citation

Kallberg, Jarl G. (Jerry) and Liu, Crocker Herbert and Pasquariello, Paolo, On the Price Comovement of U.S. Residential Real Estate Markets (August 7, 2012). Real Estate Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2126138

Jarl G. (Jerry) Kallberg

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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Crocker Herbert Liu (Contact Author)

Cornell University - School of Hotel Administration ( email )

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United States

Paolo Pasquariello

University of Michigan, Stephen M. Ross School of Business ( email )

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United States
734-764-9286 (Phone)
240-526-7168 (Fax)

HOME PAGE: http://webuser.bus.umich.edu/ppasquar/

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