House Price Dynamics and Their Reaction to Macroeconomic Changes

20 Pages Posted: 23 Oct 2012 Last revised: 13 Mar 2013

See all articles by Ogonna Nneji

Ogonna Nneji

University of Reading - ICMA Centre

Chris Brooks

University of Reading - ICMA Centre

Charles W.R. Ward

University of Reading

Date Written: February 2013

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.

Keywords: house prices, monetary policy, Markov switching model, macroeconomic drivers

JEL Classification: G12, R31

Suggested Citation

Nneji, Ogonna and Brooks, Chris and Ward, Charles W.R., House Price Dynamics and Their Reaction to Macroeconomic Changes (February 2013). Economic Modelling, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2165920 or http://dx.doi.org/10.2139/ssrn.2165920

Ogonna Nneji (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Charles W.R. Ward

University of Reading ( email )

ICMA Centre,
Henley Business School
Reading, RG6 6AB
United Kingdom
T: +44 (0)118 378 8239 (Phone)

HOME PAGE: http://www.icmacentre.ac.uk/about_us/academic_staff/professor_charles_ward,

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
252
Abstract Views
1,023
rank
137,426
PlumX Metrics