From banking integration to housing market integration - Evidence from the comovement of U.S. Metropolitan House Prices

Chi-Young Choi and J. Andrew Hansz

Journal of Financial Stability, 2021, vol. 54, issue C

Abstract: We find that the movement of urban house prices in the U.S. has become more synchronized since the early 2000s. The elevated comovement is substantial, widespread, occurring for the majority of city-pairs, and continued even after the housing market turned to bust in 2007. We investigate whether and to what extent the comovement increase can be explained by banking integration following deregulations in the banking industry. Utilizing novel measures of city-level banking integration based on bank deposit data, we find that an increase in banking integration leads to an increase in the comovement of urban house prices. City-pairs that are more connected through national banking system had experienced a greater increase in comovement, after controlling for a variety of explanatory variables. Our findings can be interpreted as spillover effect, rather than substitution effect, of banking integration at work.

Keywords: Banking integration; House price; Comovement; U.S. cities; Spillover effect (search for similar items in EconPapers)
JEL-codes: G10 G12 R12 R21 R31 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:54:y:2021:i:c:s1572308921000437

DOI: 10.1016/j.jfs.2021.100883

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