Bubbles and house price dispersion in the United States during 1975–2017

Yang Tang, Ting Zeng and Shenghao Zhu

Journal of Macroeconomics, 2020, vol. 63, issue C

Abstract: We investigate the rapid growth in the dispersion of housing prices across metropolitan statistical areas (MSAs) in the United States during 1975–2017. We first examine several explanations for this pattern, and find that it is difficult to fully explain it. Our econometric analyses show that the log of price-to-rent ratios follows a random walk process. We then set up a parsimonious asset-pricing island model. We find that the dispersion of fundamental housing prices grow too slow relative to that in data. Incorporating rational bubble solutions, our calibrated model can match the rapid growth in the dispersion of housing prices.

Keywords: The cross-sectional dispersion of housing prices; Excessive dispersion; Bubbles (search for similar items in EconPapers)
JEL-codes: E30 G12 R30 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:63:y:2020:i:c:s0164070418303215

DOI: 10.1016/j.jmacro.2019.103163

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