The interest rate sensitivity of house prices: international evidence on its state dependence

Matthias Burgert, Johannes Eugster and Victoria Otten

No 2024-01, Working Papers from Swiss National Bank

Abstract: This paper investigates how house prices have historically responded to interest rates and how their reaction has depended on preexisting conditions. We identify exogenous variations in short-term interest rates for 29 OECD countries relying on international spillovers from US monetary policy. Our results suggest that the average house price reaction is larger and more protracted than most of the previous estimates suggest. Amplitude and speed, however, depend considerably on the specific context. The reaction of house prices is larger and faster when interest rates are low, when their increase occurs during a recession, and when credit conditions are already tight. A preceding boom in house prices slows the price reaction at first but amplifies the decline in the medium term. Based on these results, we estimate how the cyclical conditions prevalent in 2022 typically influenced the house price reaction in our historical sample.

Keywords: House prices; Interest rates; Local projection; Smooth transition function (search for similar items in EconPapers)
JEL-codes: E32 E51 R21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024
New Economics Papers: this item is included in nep-ifn and nep-ure
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.snb.ch/en/publications/research/workin ... orking_paper_2024_01 (text/html)

Related works:
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:snb:snbwpa:2024-01

Access Statistics for this paper

More papers in Working Papers from Swiss National Bank Contact information at EDIRC.
Bibliographic data for series maintained by Enzo Rossi ().