Hot and Cold Housing Markets: International Evidence

Javier Suarez and Jose A. Ceron

No 5411, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines the experience of 14 developed countries for which there are about 30 years of quarterly inflation-adjusted housing price data. Price dynamics is modelled as a combination of a country-specific component and a cyclical component. The cyclical component is a two-state Markov switching process with parameters common to all countries. We find that the latent cyclical variable captures previously undocumented changes in the volatility of real housing price increases. These volatility phases are quite persistent (about six years, on average) and occur with about the same unconditional frequency over time. In line with previous studies, the mean of real housing price increases can be predicted to be larger when lagged values of those increases are large, real GDP growth is high, unemployment falls, and interest rates are low or have declined. Our findings have important implications for risk management in regard to residential property markets.

Keywords: Housing prices; Cycles; Volatility; Markov switching (search for similar items in EconPapers)
JEL-codes: E32 G15 R31 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-bec, nep-fin, nep-fmk, nep-geo, nep-mac, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
https://cepr.org/publications/DP5411 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Hot and Cold Housing Markets: International Evidence (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5411

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5411

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().