Does Partisan Conflict in Congress Affect the U.S. Housing Market?

11 Pages Posted: 3 Mar 2023

See all articles by Panagiota Makrychoriti

Panagiota Makrychoriti

Birkbeck, University of London

Emmanouil G. Pyrgiotakis

University of Essex - Essex Business School

Date Written: February 28, 2023

Abstract

This study investigates the impact of partisan conflict in the U.S. housing market using a structural Factor-Augmented Vector AutoRegression (FAVAR) model. Our findings indicate that a positive shock in partisan conflict leads to a negative response in new housing starts and a positive response to house prices. Furthermore, we find that there is substantial variation of these responses across U.S. states, a fact which can be attributed to intrastate differences in homeownership rates and demand elasticities. Our findings have important policy implications, especially in the current period which is characterized by rising interest rates, political polarization, and a downturn in the U.S. real estate market.

Keywords: Politics, Uncertainty, Housing market, FAVAR

JEL Classification: F62, B26, E44, G38

Suggested Citation

Makrychoriti, Panagiota and Pyrgiotakis, Emmanouil G., Does Partisan Conflict in Congress Affect the U.S. Housing Market? (February 28, 2023). Available at SSRN: https://ssrn.com/abstract=4372616 or http://dx.doi.org/10.2139/ssrn.4372616

Panagiota Makrychoriti (Contact Author)

Birkbeck, University of London ( email )

Malet st.
Bloomsbury
London
United Kingdom

Emmanouil G. Pyrgiotakis

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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