Skip to main content
Top
Published in: The Annals of Regional Science 2/2023

12-08-2022 | Original Paper

Regional house price co-movement in the USA: the medium cycle is not the business cycle

Author: William Miles

Published in: The Annals of Regional Science | Issue 2/2023

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Co-movement in different regional housing markets has implications for portfolio management, as well as the effectiveness of monetary and other policies. Such co-movement has thus been the subject of several previous studies.
Research on regional house price cohesion has tended to focus either on long-run convergence to a common level or on business cycle synchronization. While the extent of both types of relationships is important, research on national housing, credit and equities has established the salience of co-movement at the intermediate frequency, or of medium cycles. Indeed, at the national level, medium cycles in housing and credit together have been shown to characterize the financial cycle. Research on the UK has found that regional house price co-movement is different at business versus medium cycle frequencies.
In this paper, we examine co-movement of house prices across the regions of the USA. We compare co-movement at the business and medium cycle frequencies. We find that medium cycles are more volatile than short-term fluctuations, making medium-term movements more important for housing. Moreover, house price synchronization across regions is for the most part greater at the medium than the short-term frequency. There did appear to be an increase in co-movement around the time of the early 1990s recession, although this was not sustained for all regions or all frequencies. Lastly, while short-term synchronization has been declining among the regions of the US housing market, medium co-movement appears to be rising over the last several decades.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 390 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Maschinenbau + Werkstoffe




 

Jetzt Wissensvorsprung sichern!

Literature
go back to reference Abbott A, De Vita G (2013) Testing for long-run convergence across regional house prices in the UK: a pairwise approach. Appl Econ 45:1227–1238CrossRef Abbott A, De Vita G (2013) Testing for long-run convergence across regional house prices in the UK: a pairwise approach. Appl Econ 45:1227–1238CrossRef
go back to reference Aikman D, Haldane A, Nelson B (2015) Curbing the credit cycle. Econ J 125:1072–1109 Aikman D, Haldane A, Nelson B (2015) Curbing the credit cycle. Econ J 125:1072–1109
go back to reference Ashworth J, Parker S (1997) Modelling regional house prices in the UK. Scot J Politic Econ 44:225–246CrossRef Ashworth J, Parker S (1997) Modelling regional house prices in the UK. Scot J Politic Econ 44:225–246CrossRef
go back to reference Austin BE, Glaeser EL, Summers L (2018) “Jobs for the Heartland: place-based policies in twenty-first century America”. Brookings Papers on Economics Activity, Spring Austin BE, Glaeser EL, Summers L (2018) “Jobs for the Heartland: place-based policies in twenty-first century America”. Brookings Papers on Economics Activity, Spring
go back to reference Baffoe-Bonnie J (1998) The dynamic impact of macroeconomic aggregates on housing prices and stock of housing: a national and regional analysis. J Real Estate Financ Econ 17:179–197CrossRef Baffoe-Bonnie J (1998) The dynamic impact of macroeconomic aggregates on housing prices and stock of housing: a national and regional analysis. J Real Estate Financ Econ 17:179–197CrossRef
go back to reference Clark S, Coggin T (2009) Trends, cycles and convergence in US regional house prices. J Real Estate Financ Econ 39:264–283CrossRef Clark S, Coggin T (2009) Trends, cycles and convergence in US regional house prices. J Real Estate Financ Econ 39:264–283CrossRef
go back to reference Comin D, Gertler M (2005) Medium-term business cycles. Am Econ Rev 96:523–551CrossRef Comin D, Gertler M (2005) Medium-term business cycles. Am Econ Rev 96:523–551CrossRef
go back to reference Cook S, Watson D (2016) A new perspective on the ripple effect in the UK housing market: comovement, cyclical subsamples and alternative indices. Urban Stud 53:3048–3053CrossRef Cook S, Watson D (2016) A new perspective on the ripple effect in the UK housing market: comovement, cyclical subsamples and alternative indices. Urban Stud 53:3048–3053CrossRef
go back to reference Drake L (1993) Modelling UK house prices using cointegration: an application of the johansen technique. Appl Econ 25:1225–1228CrossRef Drake L (1993) Modelling UK house prices using cointegration: an application of the johansen technique. Appl Econ 25:1225–1228CrossRef
go back to reference Drake L (1995) Testing for convergence between UK regional house prices. Reg Stud 4:357–366CrossRef Drake L (1995) Testing for convergence between UK regional house prices. Reg Stud 4:357–366CrossRef
go back to reference Drehmann M, Borio C, Tsatsaronis K (2012) Characterizing the Financial Cycle: Don’t Lose Sight of the Medium Term. BIS Working Paper 380 Drehmann M, Borio C, Tsatsaronis K (2012) Characterizing the Financial Cycle: Don’t Lose Sight of the Medium Term. BIS Working Paper 380
go back to reference Fadiga M, Wang Y (2009) A multivariate unobserved component analysis of the US housing market. J Econ Financ 33:13–26CrossRef Fadiga M, Wang Y (2009) A multivariate unobserved component analysis of the US housing market. J Econ Financ 33:13–26CrossRef
go back to reference Gray D (2019) Medium-term cycles and housing: is regional integration different? Urban Stud 56:1786–1800CrossRef Gray D (2019) Medium-term cycles and housing: is regional integration different? Urban Stud 56:1786–1800CrossRef
go back to reference Hamilton J (2017) Why you should never use the Hodrick-Prescott filter. Rev Econ Stat 100(5):831–843CrossRef Hamilton J (2017) Why you should never use the Hodrick-Prescott filter. Rev Econ Stat 100(5):831–843CrossRef
go back to reference Hernandez-Murillo RM, OwyangRubio MTM (2017) Clustered housing cycles. Reg Sci Urban Econ 66:185–197CrossRef Hernandez-Murillo RM, OwyangRubio MTM (2017) Clustered housing cycles. Reg Sci Urban Econ 66:185–197CrossRef
go back to reference Imbs J (2004) Trade, finance, specialization and synchronization. Rev Econ Stat 86:723–734CrossRef Imbs J (2004) Trade, finance, specialization and synchronization. Rev Econ Stat 86:723–734CrossRef
go back to reference Leamer E (2007) Housing is the Business Cycle. National Bureau of Economic Research Working Paper 13428 Leamer E (2007) Housing is the Business Cycle. National Bureau of Economic Research Working Paper 13428
go back to reference Leamer E (2015) Housing really is the business cycle: what survives the lessons of 2008–09? J Money, Credit, Bank 47:43–50CrossRef Leamer E (2015) Housing really is the business cycle: what survives the lessons of 2008–09? J Money, Credit, Bank 47:43–50CrossRef
go back to reference Mian A, Sufi A (2022) Credit Supply and Housing Speculation. Rev Financ Stud 35:680–719CrossRef Mian A, Sufi A (2022) Credit Supply and Housing Speculation. Rev Financ Stud 35:680–719CrossRef
go back to reference Miles W (2015a) Regional house price segmentation and convergence in the US: a new approach. J Real Estate Financ Econ 50:113–128CrossRef Miles W (2015a) Regional house price segmentation and convergence in the US: a new approach. J Real Estate Financ Econ 50:113–128CrossRef
go back to reference Miles W (2015b) Bubbles, busts and breaks in UK housing. Int Real Estate Rev 18:455–471CrossRef Miles W (2015b) Bubbles, busts and breaks in UK housing. Int Real Estate Rev 18:455–471CrossRef
go back to reference Miles W (2019) Regional convergence and structural change in US housing markets. Reg Sci, Reg Stud 6:520–538 Miles W (2019) Regional convergence and structural change in US housing markets. Reg Sci, Reg Stud 6:520–538
go back to reference Mink M, Jacobs J, de Haan J (2012) Measuring coherence of output gaps with an application to the Euro area. Oxf Econ Pap 64:217–236CrossRef Mink M, Jacobs J, de Haan J (2012) Measuring coherence of output gaps with an application to the Euro area. Oxf Econ Pap 64:217–236CrossRef
go back to reference Minsky H (1986) Stabilizing and unstable economy. Yale University Press Minsky H (1986) Stabilizing and unstable economy. Yale University Press
go back to reference Phillips P, Yu J (2011) Dating the timeline of financial bubbles during the subprime crisis. Quant Econ 2:455–491CrossRef Phillips P, Yu J (2011) Dating the timeline of financial bubbles during the subprime crisis. Quant Econ 2:455–491CrossRef
go back to reference Pollakowski H, Ray T (1997) Housing price diffusion patterns at different aggregation levels: an examination of housing market efficiency. J Hous Res 8:107–124 Pollakowski H, Ray T (1997) Housing price diffusion patterns at different aggregation levels: an examination of housing market efficiency. J Hous Res 8:107–124
go back to reference Rose A, Engle C (2001) Currency unions and international integration. CPR Discussion Paper 2659 Rose A, Engle C (2001) Currency unions and international integration. CPR Discussion Paper 2659
go back to reference Smith L, Ho M (1996) The relative price differential between higher and lower priced homes. J Hous Econ 19:396–416 Smith L, Ho M (1996) The relative price differential between higher and lower priced homes. J Hous Econ 19:396–416
go back to reference Smith B, Tesaraek W (1991) House prices and regional real estate cycles: markets adjustments in Houston. Real Estate Econ 19:396–416CrossRef Smith B, Tesaraek W (1991) House prices and regional real estate cycles: markets adjustments in Houston. Real Estate Econ 19:396–416CrossRef
go back to reference Stein J (1995) Prices and trading volume in the housing market: a model with down payment effects. Quart J Econ 110:379–406CrossRef Stein J (1995) Prices and trading volume in the housing market: a model with down payment effects. Quart J Econ 110:379–406CrossRef
Metadata
Title
Regional house price co-movement in the USA: the medium cycle is not the business cycle
Author
William Miles
Publication date
12-08-2022
Publisher
Springer Berlin Heidelberg
Published in
The Annals of Regional Science / Issue 2/2023
Print ISSN: 0570-1864
Electronic ISSN: 1432-0592
DOI
https://doi.org/10.1007/s00168-022-01172-4

Other articles of this Issue 2/2023

The Annals of Regional Science 2/2023 Go to the issue