The Asymmetric Effects of Real Estate Uncertainty Shock

Seulki Lee and Young Min Kim

Journal of Real Estate Research, 2025, vol. 47, issue 1, 28-52

Abstract: In this paper, we explore the asymmetric impact of real estate uncertainty (REU) shock on the U.S. economy and housing market in high- and low-volatility states. To do this, we apply the Markov-switching vector autoregression model. Our empirical results show that the macroeconomic and housing markets react negatively to unexpected uncertainties, and the response to the REU shock is much greater than other housing-related variables in high-volatility states. We confirm the presence of the real-options channel based on the following results: both housing starts and construction employment decrease, and housing inventory increases, especially in low-volatility states. In the short run, we observe a delayed pattern in housing starts and construction employment variables. The effect of the channel is less significant in times of high volatility but confirmed in low volatility. The forecast error variance decomposition results show that the REU shock is greater under high REU volatility and plays a more significant role in explaining most housing-related variables.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/08965803.2023.2280320 (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:taf:rjerxx:v:47:y:2025:i:1:p:28-52

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjer20

DOI: 10.1080/08965803.2023.2280320

Access Statistics for this article

Journal of Real Estate Research is currently edited by William Hardin and Michael Seiler

More articles in Journal of Real Estate Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().