(A)Synchronous Housing Markets of Global Cities

Vipul Bhatt () and N. Kundan Kishor ()
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Vipul Bhatt: James Madison University
N. Kundan Kishor: University of Wisconsin-Milwaukee

The Journal of Real Estate Finance and Economics, 2025, vol. 71, issue 2, No 2, 178-208

Abstract: Abstract In this paper we examine house price synchronization in 15 global cities using real house price data from 1995:Q1-2020:Q2. We find that although there is evidence for bilateral positive phase synchronization, there is no evidence for an integrated global housing market for our sample of cities. Using a hierarchical clustering approach, we identify three clusters of cities with similar housing price cycles that are not solely determined by geographic proximity. We interpret this finding as suggestive of a rather segmented housing market for the global cities in our sample. Using a dynamic factor model with time-varying stochastic volatility, we decompose a city’s real housing price growth into a global component, a cluster-based component, and an idiosyncratic component. For most cities in our sample, the global component plays a minor role, whereas the cluster-based factor explains a large fraction of the observed variation in real house price growth, with its contribution peaking during the Great Recession of 2007-09.

Keywords: Global housing market; House price synchronization; Cluster analysis; Dynamic factor model (search for similar items in EconPapers)
JEL-codes: C38 E32 F36 F44 R30 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-022-09903-2

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