House Price Growth Interdependencies and Comovement

36 Pages Posted: 14 May 2021

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division

Daniel Soques

University of North Carolina (UNC) at Wilmington

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2019

Abstract

This paper examines house price comovement across U.S. metropolitan areas (MSAs). We develop a Markov-switching framework that includes a spatial similarity element based on distances between MSAs. Our approach allows for house price comovements that occur due to similar timing of downturns across groups or clusters of MSAs. The inclusion of the spatial element improves the model fit compared to a standard endogenous clustering model. We find seven clusters of MSAs, where each cluster experiences idiosyncratic house price downturns, plus one distinct national house price cycle. Notably, only the housing downturn associated with the Great Recession spread across all the MSAs in our sample; all other house price downturns remained contained to a single cluster. We also identify MSA economic and geographic characteristics that correlate with cluster membership. In addition, while prior research has found housing and business cycles to be related closely at the national level, we find very different house price comovement and employment comovement across clusters and across MSAs.

JEL Classification: C3, R30

Suggested Citation

Cohen, Jeffrey and Coughlin, Cletus C. and Soques, Daniel, House Price Growth Interdependencies and Comovement (September 1, 2019). FRB St. Louis Working Paper No. 2019-028, Available at SSRN: https://ssrn.com/abstract=3843865 or http://dx.doi.org/10.20955/wp.2019.028

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Daniel Soques

University of North Carolina (UNC) at Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

HOME PAGE: http://people.uncw.edu/soquesd/index.html

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