Risk shocks and housing supply: A quantitative analysis

Dorofeenko, Victor; Lee, Gabriel S.; Salyer, Kevin D.

doi:10.1016/j.jedc.2014.05.014

Cited by 19 publications

(13 citation statements)

References 18 publications

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“…We find that uncertainty adversely affects the median sale prices and house prices on average by 1.68% and 1.31%, respectively. In other words, Dorofeenko, Lee and Salyer () results are driven by the supply side, which our empirical results do not necessarily support. Moreover, we find uncertainty impacts neither turnover nor the share of houses selling for loss directly.…”

Section: Empirical Model and Resultscontrasting

confidence: 89%

“…We interpret this result as the different proxies capturing different aspects of uncertainty, with the proxy of Jurado, Ludvigson and Ng () being well suited, due to its construction, to capture the spells of uncertainty that induce macrolevel real options effects. Our empirical findings, that Macro Uncertainty has significant effects on housing sector as well as on real activity variables, support, for example, Christiano, Motto and Rostagno () and Dorofeenko, Lee and Salyer (). Dynamic Stochastic General Equilibrium (DSGE) macrohousing models findings that the effect uncertainty shock on housing and aggregate variables are quantitatively large.…”

Section: Resultssupporting

confidence: 83%

“…But our approach differs from others as we analyze the simultaneous effects of both shocks on the U.S. housing market. For example, Christiano, Motto and Rostagno () show that uncertainty adversely impacts the aggregate economy, while Dorofeenko, Lee and Salyer () show that uncertainty shocks can explain the U.S. housing price volatilities. For the labor demand shock on housing and labor markets, Edlund, Machado and Sviatschi () examine the impact of labor demand shocks, using the Bartik index, on housing prices, and Shoag and Veuger () empirically show that uncertainty may amplify labor demand shocks.…”

Section: Introductionmentioning

confidence: 99%

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Effects of Macroeconomic Uncertainty and Labor Demand Shocks on the Housing Market

Thanh

Lee²

2018

Real Estate Economics

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This article shows that macroeconomic uncertainty affects the housing market in two significant ways. First, uncertainty shocks adversely affect housing prices but not the quantities that are traded. Controlling for a broad set of variables in fixed-effects regressions, we find that uncertainty shocks reduce both housing prices and median sales prices in the amount of 1.4% and 1.8%, respectively, but the effect is not statistically significant for the percentage changes of all homes sold. Second, when both uncertainty and local demand shocks are introduced, the effects of uncertainty on the housing market dominate that of local labor demand shocks on housing prices, median sale prices, the share of houses selling for a loss and transactions. The aforementioned effects are largest for the states that exhibit relatively high housing price volatilities, suggesting real options effects in the housing market during the times of high uncertainty.

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Section: Empirical Model and Resultscontrasting

confidence: 89%

Section: Resultssupporting

confidence: 83%

Section: Introductionmentioning

confidence: 99%

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Effects of Macroeconomic Uncertainty and Labor Demand Shocks on the Housing Market

Thanh

Lee²

2018

Real Estate Economics

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“…1 This evidence shows that uncertainty shocks have persistent effects, delaying the recovery of both the housing market as well as the whole economy. This study, consequently, introduces a novel impulse mechanism and complements the recent work of Dorofeenko et al (2014), that analyzes the effects of supply-side risk to the housing sector. Furthermore, our work complements Iacoviello & Neri (2010), by providing a further source of spill-overs from the housing market to the real economy.…”

Section: Figurementioning

confidence: 91%

Real Estate Economics

Püschel¹

2019

26th Annual European Real Estate Society Conference

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Even after the end of the recent Great Recession period, U.S. housing prices and real estate loans continued to decline, while the uncertainty associated with the housing market remained elevated. This paper shows that an increase in uncertainty with respect to housing demand, i.e. a time-varying second moment of housing preferences, generates these dynamics and implies adverse effects for key macroeconomic aggregates such as output and consumption: An increase in housing preference volatility dampens housing prices which reduces the collateral value, borrowing activity and translates to a decrease in aggregate economic activity. Finally, we find these results to be broadly in line with the data.• JEL Classification: ... 1 We compare the model's housing demand volatility shock and the empirical results, based on the REU index, despite them not being completely consistent as preferences are notoriously hard to measure.

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“…1 Bloom, Floetotto, Jaimovich, Saporta-Eksten, and Terry (2012), for instance, use uncertainty proxies derived from both realized and forecast real variables to calibrate their model, while Bloom (2009) uses a measure of forecast stock market volatility. Chugh (2012) and Dorofeenko, Lee, and Salyer (2014), in turn, derive uncertainty on a sectoral level based on realized real data. This paper shows that ex ante, the standard deviation of profit growth and stock returns in the U.S. economy, in the manufacturing sector and in the services sector fluctuates less than ex post by comparing the conditional standard deviation forecast to the realized cross-sectional standard deviation and to the interquartile range (IQR).…”

Section: Introductionmentioning

confidence: 99%

On the different approaches of measuring uncertainty shocks

Strobel

2015

Economics Letters

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As uncertainty has become an increasingly prominent source of business cycle fluctuations, various uncertainty proxies have been proposed in the literature. This paper shows that uncertainty measures based on realized variables fluctuate more than the measures that are based on forecasts. More precisely, the variation in the realized cross-sectional standard deviation of profit growth and stock returns is larger than the variation in the forecast standard deviation. Moreover, the forecast standard deviation of profit growth and stock returns are negatively or uncorrelated, the uncertainty measures increase stock returns due to a risk premium, but they decrease profit growth.Suggested Reviewers: Kevin D. Salyer PhD Professor , Economics, University of California, Davis kdsalyer@ucdavis.edu Prof. Salyer is a proficient economist and highly familiar with uncertainty and its impact on the macroeconomy.Victor Dorofeenko PhD Researcher, Economics, Institut fuer Hoehere Studien dorofeen@ihs.ac.at Mr. Dorofeenko is highly familiar with uncertainty and its impact on the economy with respect to both theoretical and empirical models.Harris Dellas PhD Professor, Economics, University of Bern harris.dellas@vwi.unibe.ch Prof. Dellas is a very proficient economist, familiar with the latest research of uncertainty and its impact on the economy. On the Different Approaches of Measuring Uncertainty ShocksJohannes Strobel, University of Regensburg * April 16, 2015 AbstractAs uncertainty has become an increasingly prominent source of business cycle fluctuations, various uncertainty proxies have been proposed in the literature. This paper shows that uncertainty measures based on realized variables fluctuate more than the measures that are based on forecasts. More precisely, the variation in the realized cross-sectional standard deviation of profit growth and stock returns is larger than the variation in the forecast standard deviation.Moreover, the forecast standard deviation of profit growth and stock returns are negatively or uncorrelated, the uncertainty measures increase stock returns due to a risk premium, but they decrease profit growth.

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Risk shocks and housing supply: A quantitative analysis

Cited by 19 publications

References 18 publications

Effects of Macroeconomic Uncertainty and Labor Demand Shocks on the Housing Market

Effects of Macroeconomic Uncertainty and Labor Demand Shocks on the Housing Market

Real Estate Economics

On the different approaches of measuring uncertainty shocks

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