Revisiting housing asset pricing: uncertainty and business-cycle factors in US state-level housing markets

MeiChi Huang ()
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MeiChi Huang: National Taipei University

The Annals of Regional Science, 2025, vol. 74, issue 1, No 36, 25 pages

Abstract: Abstract This study develops two novel housing risk factors to analyze their explanatory powers of housing risk premiums in the Markov–switching housing asset pricing model. The two factors are the uncertainty factor, which accounts for housing risk premium differentials between states with high and low levels of economic policy uncertainty (EPU) indexes, and the business-cycle factor, which captures differences in housing risk premiums between states at varying levels of economic condition indicators (ECIs). The Markov–switching model outperforms traditional linear frameworks in capturing housing risk premiums, particularly for top- and middle-tier houses. The high-impact regimes associated with both EPU and ECI factors coincide with the 2007–09 housing crisis and the COVID-19 pandemic period. These findings provide important implications for housing risk management and policy-making.

JEL-codes: C32 C58 R30 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00168-025-01366-6

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