Price Jump Risk in the US Housing Market

Posted: 24 Aug 2015

See all articles by Robert I. Webb

Robert I. Webb

University of Virginia - McIntire School of Commerce

Jian Yang

University of Colorado at Denver - Business School

Jin Zhang

Independent

Multiple version iconThere are 2 versions of this paper

Date Written: August 22, 2015

Abstract

Housing prices, like the prices of other speculative assets, contain a mix of both small and large changes (i.e., jumps). We apply a jump-GARCH model to monthly Case-Shiller housing price indexes of twenty cities in the U.S. during the period January 1991 through December 2011. We document the evidence of large housing price jumps in many cities, during both the financial crisis and non-crisis periods. The housing price jump intensity observed during the whole sample is largely explained by city, state and national-level fundamentals. However, consistent with the development of an asset bubble, there is further evidence of a decoupling between housing price jump intensity and fundamentals during the active or turbulent phase of the U.S. housing market that immediately preceded the onset of the Global Financial Crisis. No evidence of a decoupling from fundamentals is observed during the normal or tranquil phase of the U.S. housing market.

Keywords: Housing price index, Jump intensity, Economic fundamentals

JEL Classification: R30, C58

Suggested Citation

Webb, Robert I. and Yang, Jian and Zhang, Jin, Price Jump Risk in the US Housing Market (August 22, 2015). Journal of Real Estate Finance and Economics, 2015 Forthcoming. Available at SSRN: https://ssrn.com/abstract=2649510

Robert I. Webb

University of Virginia - McIntire School of Commerce ( email )

Rouss and Robertson Halls 125 Ruppel Lane
Charlottesville, VA 22903
United States
(434) 924-7570 (Phone)

Jian Yang (Contact Author)

University of Colorado at Denver - Business School ( email )

1250 14th St.
Denver, CO 80204
United States

Jin Zhang

Independent ( email )

No Address Available

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