Determinants of Real House Price Dynamics

Dennis Capozza, Patric Hendershott, Charlotte Mack and Christopher Mayer

No 9262, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the dynamics of real house prices by estimating serial correlation and mean reversion coefficients from a panel data set of 62 metro areas from 1979-1995. The serial correlation and reversion parameters are then shown to vary cross sectionally with city size, real income growth, population growth, and real construction costs. Serial correlation is higher in metro areas with higher real income, population growth and real construction costs. Mean reversion is greater in large metro areas and faster-growing cities with lower construction costs. Empirically, substantial overshooting of prices can occur in high real construction cost areas, which have high serial correlation and low mean reversion, such as the coastal cities of Boston, New York, San Francisco, Los Angeles and San Diego.

JEL-codes: G12 R31 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-ure
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