Spatial Spillovers between Stock, Residential REITs, and Housing Market

Yuan Zhao and Pin-Te Lin

ERES from European Real Estate Society (ERES)

Abstract: Extensive body of literature investigating the dynamic relationship between national housing and stock price movements has been conducted. However, studies focusing on the regional housing markets are scant. In this study, we intend to explore the dynamics between regional housing, residential REITs, and stock markets in the US, to provide a comprehensive view of the spatialisation of the performance of indirect real estate, direct real estate, and stock markets. Using house price index for national and 20 cities, we employ the unconditional and rolling-window three-dimensional VAR model and Diebold-Yilmaz spillover index to investigate the contemporaneous relationships among the three markets. The linkage between causality and spatial dynamics from the local housing market, such as population, income, and elasticities, have been examined. We find strong bi-directional causality between stock market and residential REITs, at both national- and city-level. However, only single-directional causality has been detected from stock or residential REITs to housing market for majority of cities, implying a wealth effect. We find stronger spillovers from REITs to housing compared to stock to housing market. The spillovers from housing to the other two markets are significantly lower. The transmission of spillovers get intensified during economics crisis periods, and regional market elasticities.

Keywords: housing market; Residential REITs; Spillovers; Stock market (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-inv
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