Consumer sentiment and house prices: asymmetric evidence from state-level data in the United States

Abstract

Purpose The purpose of this paper is to assess and compare the symmetric and asymmetric effects of consumer sentiment on house prices in each state of the USA. This is the first study that uses state-level data. Design/methodology/approach Both linear and nonlinear autoregressive distributed lag approaches are used to assess the asymmetric effects of consumer sentiment on house prices in each state of the USA. Findings When the authors estimated a linear symmetric model, this paper found short-run effects of consumer sentiment on house prices in 34 states that lasted into the long-run in only 13 states. The comparable numbers by estimating a nonlinear asymmetric model were 47 and 22, respectively. The increase in the number of states where consumer sentiment affects house prices was attributed to the nonlinear adjustments of consumer sentiment. Originality/value The authors deviate from previous research and assess the impact of consumer sentiment on house prices by using data from each state of the USA. The authors also deviate from previous research by demonstrating that the effects could be asymmetric. No study has done this at the state-level.

Interest rates and Islamic commercial property financing: can there be a possible solution?

“…Consistent with recent research (Bahmani-Oskooee et al , 2021; Uzuner et al , 2021; Özgüler et al , 2022; Coskun, 2022), this study adopts ARDL because of it being accommodative to a small data set (Pesaran et al , 2001). Our sample covers the available data of Islamic banks in Malaysia ranging from 2010: Q1 to 2018: Q2, coupled with macroeconomic and other financial indicators.…”

“…Our models follow Yusof et al (2018) model with modifications relating to sample, period and context variability. Most of the recent pieces of literature (Sukmana and Setianto, 2018; Bahmani-Oskooee et al , 2021; Uzuner et al , 2021; Özgüler et al , 2022; Coskun, 2022) on real estate and mortgages focus on the house price. However, our models extend the earlier model by Yusof et al (2016), which incorporates Islamic commercial property financing, rental rate, industrial production index (IPI), interest rate and exchange rate to reflect real economic activities.…”

“…The study found that LIBOR does not precisely reflect the bank's borrowing cost. Existing literature such as Bacha (2004), Hakan and Gulumser (2011) and Rosly (1999) has alluded that financing that relies on interest rates has adverse impacts on the real economy as well as the Islamic and conventional banking institutions. These studies found that Islamic financing is exposed to interest rate risk.…”

“…In this way, one aspect of this paper’s contribution is the application of the autoregressive distributed lag error correction modelling (ARDL-ECM) techniques to uncover the possibility of using the rental rates on commercial property financing in Malaysia, which is not yet studied. However, most of the recent literature on property and mortgage finance concentrates on the house price index (Sukmana and Setianto, 2018; Bahmani-Oskooee et al , 2021; Uzuner et al , 2021; Özgüler et al , 2022; Coskun, 2022; Bos et al , 2022). At the same time, another strand of the literature pivots on home financing (Jensen et al , 2022; Chen et al , 2022; Ibrahim and Sapian, 2022) without an in-depth analysis of the alternative costs of financing.…”