Exploring Metropolitan Housing Price Volatility

37 Pages Posted: 16 Dec 2003

See all articles by Norman G. Miller

Norman G. Miller

University of San Diego - Real Estate Institute

Liang Peng

Smeal College of Business, The Pennsylvania State University

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003

Abstract

This paper investigates dynamic interrelations between the volatility of single-family home appreciation and the rate of home value appreciation, personal income, population, unemployment rate, and GMP at the metropolitan level, using a large quarterly data set that covers 316 metropolises in the United States from 1978 to 2002. We use a novel three-step approach that allows for time-dependent expected home appreciation rates while controlling for unobserved metropolitan attributes and macro factors. We find that the appreciation volatility can be explained based on past home appreciation rate and volatility, exogenous shocks to the housing market, and population growth. The volatility affects expected future home value appreciation, as well as the growth rates of personal income and population. Last we find evidence that constrained housing supplies in more populated metropolises influence appreciation rates and volatility.

Keywords: home value appreciation, housing price volatility, metropolitan economy, panel VAR

JEL Classification: C52, G10, R21, R31

Suggested Citation

Miller, Norman G. and Peng, Liang, Exploring Metropolitan Housing Price Volatility (November 2003). Available at SSRN: https://ssrn.com/abstract=468300 or http://dx.doi.org/10.2139/ssrn.468300

Norman G. Miller

University of San Diego - Real Estate Institute ( email )

San Diego, CA
United States

Liang Peng (Contact Author)

Smeal College of Business, The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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