Anatomy of the Beginning of the Housing Boom across U.S. Metropolitan Areas

Abstract

We provide novel estimates of the location, timing, magnitude, and determinants of the start of the last U.S. housing boom. The last housing cycle cannot be interpreted as a single, national event, as different markets began to boom across a decade-long period, some of them multiple times. A fundamental factor, income of prospective buyers, can account for half of the initial jump in price growth, while expansion of purchases by underrepresented minorities cannot. The start of the boom also was financed conventionally, not by subprime mortgages. The latter's share did rise sharply over time, but only after a multi-year lag.

Housing prices in Spain: convergence or decoupling?

“…Schubert (2021) analyzes spatial dependencies in housing prices across a number of US cities and shows that volatility linkages are more intensive during a real estate boom. In the same line, Ferreira and Gyourko (2022) and DeFusco et al (2018) study the last US housing boom, looking at the evolution of real estate prices at the neighborhood level, and show that the latter was generated by a series of local booms that propagated from one local market to another, resulting in the 2007 boom that affected the entire country. This paper contributes to this literature by providing evidence on the evolving heterogeneity of city-level housing prices in Spain and investigating price synchronization patterns across Spanish cities.…”

“…This can in turn increase the risk of periods of low economic activity, especially if coupled with buoyant credit markets. For instance, the last US housing boom was generated by spatial spillovers of local shocks from one real estate market to another, i.e., the synchronization of local markets over the 1995-2006period (DeFusco et al 2018Ferreira and Gyourko 2022). In this respect, macroprudential policies can be effective tools to manage real estate dynamics and associated risks to the real economy and financial stability.…”