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A Regional Decomposition of US Housing Prices and Volume: Market Dynamics and Economic Diversification Opportunities

Nikolaos Antonakakis, Ioannis Chatziantoniou and David Gabauer

No 2019-06, Working Papers in Economics & Finance from University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group

Abstract: In this study we employ a TVP-VAR model in order to investigate dynamic connectedness of housing prices and sales volume across four US regional housing markets; namely, Midwest, Northeast, South, as well as, West, for the period between January 1990 and March 2019. Furthermore, utilising an insightful decomposition of the results, we provide a thorough investigation of the underlying dynamics. Overall, results indicate that during turbulent economic periods, it is sales volume shocks that drive developments in the US housing market, rather than shocks in housing prices. In addition, we find that the South is rather a persistent net transmitter of both prices and volume housing market shocks, while the Northeast, a net receiver. On the whole, all four markets assume both roles over time. Results are important for policy makers and regulators aiming to alleviate the negative ramifications of an overheated housing market. In addition, given that over time, the four markets behave differently in connection with their short run shock-transmission capacity, results are also suggestive that there is potential for economic (i.e., rather than strictly geographical) portfolio diversification.

Keywords: US regional housing markets; Housing prices; Transaction volume; TVP-VAR; Dynamic connectedness; Dynamic connectedness decomposition (search for similar items in EconPapers)
JEL-codes: C32 G10 G20 (search for similar items in EconPapers)
Pages: 25
Date: 2019-06-06
New Economics Papers: this item is included in nep-ure
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