A greater crisis? Investigating MSA-level housing markets during the COVID-19 pandemic

This study analyzes the impact of uncertainties on ten major metropolitan statistical area (MSA)-level housing markets in the US from 2000 to 2022, elucidating the distinctive characteristics of crisis-like phenomena triggered by COVID-19. The study assesses crisis and noncrisis periods and finds that time-varying volatility in uncertainty is evident during crises, and economic policy uncertainty and macroeconomic uncertainty shocks show heightened volatility. The results suggest that the COVID-19 pandemic represents a more substantial crisis than the housing market crisis of 2007–2009. The findings indicate that uncertainty elevated MSA-level housing returns in 2000–2022 and offer supporting evidence for a flight-to-quality pattern as investors tended to allocate capital to safer real estate assets. The transmission mechanism from uncertainty to metropolitan housing markets is phase-dependent, with estimated responses to uncertainty shocks during crisis phases being more robust than those observed in normal times. This study provides valuable insights for monetary policymakers and offers guidance for investors’ risk management strategies.