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Economic fundamentals and housing market

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  • Shady Kholdy
  • Ahmad Sohrabian

Abstract

This paper examines the causes of housing cycles during 1986-1994 in California using vector autoregressive (VAR) and variance decomposition technique. The paper tries to compare the effect of speculative behavour of landlords with economic fundamentals in boosting the housing demand. The empirical results suggest that economic fundamentals affected the housing market slightly during the housing boom of 1986-1990. Speculative behaviour and expectation of capital gain played a stronger role in stimulating the housing demand than economic fundamentals. The model, however, cannot explain the housing bust of 1990-1994. The results suggest that the main reason behind sluggish demand in 1990-1994 lies outside the economic fundamentals and poor expectation of capital gain.

Suggested Citation

  • Shady Kholdy & Ahmad Sohrabian, 1998. "Economic fundamentals and housing market," Applied Economics Letters, Taylor & Francis Journals, vol. 5(7), pages 459-461.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:7:p:459-461
    DOI: 10.1080/135048598354636
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    Cited by:

    1. Utku Akseki & Abdurrahman Nazif Çatık & Barış Gök, 2014. "A regime-dependent investigation of the impact of macroeconomic variables on the housing market activity in Turkey," Economics Bulletin, AccessEcon, vol. 34(2), pages 1081-1090.
    2. Todd Kuethe & Valerien Pede, 2011. "Regional Housing Price Cycles: A Spatio-temporal Analysis Using US State-level Data," Regional Studies, Taylor & Francis Journals, vol. 45(5), pages 563-574.
    3. Belayet Hossain & Ehsan Latif, 2009. "Determinants of housing price volatility in Canada: a dynamic analysis," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3521-3531.
    4. Coskun Yener & Jadevicius Arvydas, 2017. "Is there a Housing Bubble in Turkey?," Real Estate Management and Valuation, Sciendo, vol. 25(1), pages 48-73, March.

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