Housing Risk and Returns in Submarkets with Spatial Dependence and Heterogeneity

P. S. Morawakage (), G. Earl, B. Liu, E. Roca and A. Omura
Additional contact information
P. S. Morawakage: Griffith University
G. Earl: Griffith University
B. Liu: Griffith University
E. Roca: Griffith University
A. Omura: Griffith University

The Journal of Real Estate Finance and Economics, 2023, vol. 67, issue 4, No 6, 695-734

Abstract: Abstract Employing a recently developed panel econometric technique, first, we show that accounting for spatial dependence and heterogeneity yields more accurate risk factor coefficients and abnormal housing returns. Rather than systematic risks, idiosyncratic risks explain the variations in residential housing excess returns. After controlling for asset-specific and systematic risk factors, the positive and significant impact of the unobservable common factors on the excess returns suggests that speculative market forces drive the housing excess returns. Second, we then analyze the risks and returns of houses in affordable and expensive submarkets allowing for spatial dependence and heterogeneity. We find that houses in the affordable submarkets perform better than houses in the expensive submarkets. Thus, the potential demand for houses in the affordable submarket may aggravate the housing affordability crisis. Our study’s results, therefore, encourage policymakers and investors to view the housing market as a collection of regional units and submarkets, but not as a single national market.

Keywords: AMG; Housing risk-return; Spatial dependence; Speculation; Submarkets; C5; G1; I3; R1; R3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11146-021-09877-7 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:67:y:2023:i:4:d:10.1007_s11146-021-09877-7

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-021-09877-7

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().