Large price movements in housing markets

Xiaojin Sun and Kwok Ping Tsang

Journal of Economic Behavior & Organization, 2019, vol. 163, issue C, 1-23

Abstract: This paper examines large price run-ups with potential subsequent crashes and large price declines with potential subsequent rebounds in state-level and metropolitan-area-level housing markets in the U.S. over the past 40 years. We find that a sharper run-up in house prices predicts a higher probability of a crash, but a sharper decline does not necessarily predict a higher probability of a rebound. Changes in the effective interest rate in the local market can predict housing returns following large price run-ups, while it is harder to use the same factors to predict returns following large price declines. Such characteristics are robust to different thresholds of price movements.

Keywords: Predictability; Crashes; Rebounds; Bubbles; House prices (search for similar items in EconPapers)
JEL-codes: G12 R31 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:163:y:2019:i:c:p:1-23

DOI: 10.1016/j.jebo.2019.05.012

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