Regional Housing Prices in the USA: An Empirical Investigation of Nonlinearity

Sei-Wan Kim () and Radha Bhattacharya ()

The Journal of Real Estate Finance and Economics, 2009, vol. 38, issue 4, 443-460

Abstract: Existing literature on housing prices is predominantly in a linear framework, and an important question that has not been addressed is whether housing prices exhibit nonlinearity. We examine Smooth Transition Autoregressive (STAR) model based nonlinear properties of housing prices over the 1969–2004 period for the entire US and the four regions. Our main findings are (1) housing price for the entire US and all regions except for the Midwest show non-linearity, (2) the dynamic properties implied by the nonlinear estimation explain the typical patterns that have characterized each housing market, and (3) results of Granger causality tests look more plausible in the nonlinear framework where we find stronger evidence of Granger causality from housing price to employment and also from mortgage rates to housing price. Copyright Springer Science+Business Media, LLC 2009

Keywords: Housing market; STAR; Granger causality; Dynamic property; R10; R21; C12; C13; C32; G10 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (46)

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DOI: 10.1007/s11146-007-9094-y

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