House Price Moments in Boom-Bust Cycles

Sinai, Todd

doi:10.7208/chicago/9780226030616.003.0002

Cited by 19 publications

(7 citation statements)

References 15 publications

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“…Recent studies, such as Glaeser et al (), have argued that most variation in housing price changes is local, not national. Sinai () finds that in housing markets in the U.S. have experienced considerable heterogeneity in the amplitude and timing of their house price cycles. This is often attributed, at least in part, to significant variation in the elasticity of housing supply across MSAs (Glaeser, Gyourko, and Saiz ).…”

Section: Resultsmentioning

confidence: 99%

Explaining House Price Dynamics: Isolating the Role of Nonfundamentals

Ling¹,

Ooi²,

Le³

2015

J of Money Credit Banking

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This paper examines the role of nonfundamentals-based sentiment in house price dynamics, including the well-documented volatility and persistence of house prices during booms and busts. To measure and isolate sentiment's effect, we employ survey-based indicators that proxy for the sentiment of three major agents in housing markets: home buyers (demand side), home builders (supply side), and lenders (credit suppliers). After orthogonalizing each sentiment measure against a broad set of fundamental variables, we find strong and consistent evidence that the changing sentiment of all three sets of market participants predicts house price appreciation in subsequent quarters, above and beyond the impact of changes in lagged price changes, fundamentals, and market liquidity. More specifically, a one-standard-deviation shock to market sentiment is associated with a 32-57 basis point increase in real house price appreciation over the next two quarters. These price effects are large relative to the average real price appreciation of 71 basis points per quarter observed over the full sample period. Moreover, housing market sentiment and its effect on real house prices is highly persistent. The results also reveal that the dynamic relation between sentiment and house prices can create feedback effects that contribute to the persistence typically observed in house price movements during boom and bust cycles.JEL codes: R3, R21

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Section: Resultsmentioning

confidence: 99%

Explaining House Price Dynamics: Isolating the Role of Nonfundamentals

Ling¹,

Ooi²,

Le³

2015

J of Money Credit Banking

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“…The reason is that real US house prices are very difficult to predict using conventional fundamentals, such as

w_{i, t}

c_{i, t}

and

g_{i, t}

. Indeed, as Sinai ( , p. 21) concludes from his study of the US housing market over the last three decades, ‘[a]lthough changes in fundamentals are correlated with changes in house prices, cycles in these fundamentals do not have the same amplitude as price cycles and the time pattern of the growth in fundamentals does not match the timing of the growth in house prices. In fact, controlling for demand fundamentals makes the remaining boom–bust patterns in house prices even starker.’ The regressors in

{boldx}_{i, t}

alone are therefore unlikely to be enough to capture all of the time variation in

y_{i, t}

.…”

Section: Empirical Illustrationmentioning

confidence: 99%

CCE in panels with general unknown factors

Westerlund

2018

The Econometrics Journal

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A popular approach to factor-augmented panel regressions is the common correlated effects (CCE) estimator of Pesaran (Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica 74, 2006). In fact, the approach is so popular that it has given rise to a separate CCE literature. A common assumption in this literature is that the common factors are stationary, which would seem to rule out many empirically relevant cases. Moreover, deterministic factors are typically treated as known, which raises the issue of model misspecification. In the current paper, we show how the conditions placed on the factors in CCE can be made much more general than was previously thought possible. In fact, save for some mild regulatory moment conditions, the factors are essentially unrestricted. One implication of this result is that there is no need to discriminate between deterministic and stochastic factors, but that one can instead treat them all as unknown. This is very convenient for practitioners, because it means that under certain conditions they are spared of the problem of having to decide on which deterministic terms to include in the model.

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“…Andersson et al (2013) Sinai (2012), there is considerable heterogeneity in the timing, length and amplitude of the housing boom and bust across metropolitan areas. That said, our more geographically specific measure of home equity also includes more endogeneity than would arise when using aggregate housing price changes as home equity depends on loan size as well as housing price changes.…”

Section: The Effects Of Home Equity On Household Borrowingmentioning

confidence: 99%

Determinants of Mortgage Default and Consumer Credit Use: The Effects of Foreclosure Laws and Foreclosure Delays

Chan¹,

Haughwout²,

Hayashi

et al. 2015

SSRN Journal

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The mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default on mortgages and HELOCs at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage non-recourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for both housing and non-housing debts. Our analysis highlights the interconnectedness of debt repayment decisions.

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House Price Moments in Boom-Bust Cycles

Cited by 19 publications

References 15 publications

Explaining House Price Dynamics: Isolating the Role of Nonfundamentals

Explaining House Price Dynamics: Isolating the Role of Nonfundamentals

CCE in panels with general unknown factors

Determinants of Mortgage Default and Consumer Credit Use: The Effects of Foreclosure Laws and Foreclosure Delays

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