The Economic Drivers of Differences in House Price Inflation Rate Across MSAs

47 Pages Posted: 19 Jan 2016 Last revised: 22 Mar 2016

See all articles by Roland Füss

Roland Füss

University of St. Gallen - School of Finance

Joachim Zietz

EBS University, EBS Business School

Date Written: March 01, 2016

Abstract

This study examines why monetary policy at the national level can have vastly different effects on appreciation rates of single family houses across metropolitan statistical areas (MSAs). The study employs Case/Shiller monthly house price index data for 19 MSAs from 1992:06 to 2014:12 and FHFA quarterly house price index data for 94 MSAs from 1992:3 to 2014:4. We model the importance of MSA-specific demand and supply characteristics through a set of interaction terms between these factors and monetary policy. The empirical analysis is cast in terms of a state-space approach with a stochastic trend component to absorb the Impact of omitted variables. Robustness checks use panel data estimators with interaction terms. A lower federal funds rate is associated with home price run-ups in MSAs that are characterized by higher demand and tighter supply conditions.

Keywords: house price inflation, demand and supply factors, federal funds rate, monetary policy

JEL Classification: C21, C23, E50, R10

Suggested Citation

Füss, Roland and Zietz, Joachim, The Economic Drivers of Differences in House Price Inflation Rate Across MSAs (March 01, 2016). Journal of Housing Economics, Vol. 31, No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2717431 or http://dx.doi.org/10.2139/ssrn.2717431

Roland Füss (Contact Author)

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

Unterer Graben 21
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

Joachim Zietz

EBS University, EBS Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
46
Abstract Views
294
PlumX Metrics