Price Exuberance and Contagion across Housing Markets: Evidence from US Metropolitan Areas

Contagion occurs when cross-market correlation increases because of a shock to one market. Identifying shocks as episodes of house price exuberance, we provide evidence for contagion effects among the largest metropolitan markets in the US. We find that changes in income, interest rates, and unemplo...

Full description

Saved in:
Bibliographic Details
Published in:The journal of real estate finance and economics 2024-07, Vol.69 (1), p.132-163
Main Authors: Chowdhury, Md Shahedur R., Damianov, Damian S., Escobari, Diego
Format: Article
Language:English
Subjects:
Contagion
Down payments
Economics
Economics and Finance
Financial Services
Hedging
Homeowners
Households
Housing
Housing market
Housing prices
Interest rates
Liquidity
Macroeconomics
Metropolitan areas
Mobility
Prices
Regional/Spatial Science
Securities markets
Unemployment
Volatility
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Contagion occurs when cross-market correlation increases because of a shock to one market. Identifying shocks as episodes of house price exuberance, we provide evidence for contagion effects among the largest metropolitan markets in the US. We find that changes in income, interest rates, and unemployment also create contagion effects. These empirical findings are consistent with a model in which shocks to house prices and economic variables relax household down payment constraints and increase household mobility and housing demand. These effects are explored in an equilibrium framework in which house prices and household choices are determined endogenously, and we account for this endogeneity in our empirical study. Our results are robust to various empirical specifications, and we discuss the implications of these findings for households and investors.
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-022-09925-w