The cause and outcomes of the ripple effect: housing prices and transaction volume

I-Chun Tsai ()
Additional contact information
I-Chun Tsai: National University of Kaohsiung

The Annals of Regional Science, 2018, vol. 61, issue 2, No 6, 373 pages

Abstract: Abstract In this study, the ripple effect in four regional housing markets in the USA (Northeast, Midwest, South, and West) was examined by analyzing housing prices, which is a method that has been primarily used in other studies, and the transfer of information in the transaction volume data of regional markets. First, the ripple index between regional housing markets was estimated using housing price and transaction volume. Findings revealed that the ripple effect in the transaction volume of regional housing markets was far more evident than that in housing prices and that the two types of ripple effect are negatively correlated. In other words, information between regional housing markets is either transferred through price or volume. In this study, monetary policy, overall economic performance, and new housing market were adopted as variables to analyze the cause and outcomes of the ripple effect. The results show that inflation stemming from an excess supply of money causes a ripple effect of rising regional housing prices. This money illusion leads contractors to believe that the housing market has increasing demand, motivating them to enter into new projects. Once these projects are completed, the increase in supply (new homes for sale) is reflected in the transaction volume of the regional housing market. In this instance, a stagnation in housing prices signifies that information is only transferred in the transaction volume. In short, the rise (housing boom) and fall (housing depression) of transaction volume affect interest rates in the mortgage market.

JEL-codes: R10 R21 R31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1007/s00168-018-0870-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:anresc:v:61:y:2018:i:2:d:10.1007_s00168-018-0870-9

Ordering information: This journal article can be ordered from
http://link.springer.com/journal/168

DOI: 10.1007/s00168-018-0870-9

Access Statistics for this article

The Annals of Regional Science is currently edited by Martin Andersson, E. Kim and Janet E. Kohlhase

More articles in The Annals of Regional Science from Springer, Western Regional Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().