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Cointegration Analysis of Regional House Prices in U.S

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  • Zohrabyan, Tatevik
  • Leatham, David J.
  • Bessler, David A.

Abstract

Using quarterly U.S. census division data for time period 1975-2006, this paper investigates the dynamic relationships among the house prices of nine divisions (regions): Pacific, Mountain, South Atlantic, Middle Atlantic, New England, East South Central, West South Central, West North Central, and East North Central. Johansen’s ML procedure is applied to shed light on the short-run and long-run components on the error correction model. Furthermore, a symmetric error-correction model is estimated followed by the contemporaneous causality structure that is provided by the directed acyclic graphs. The latter is used as an “input” for estimating the impulse response functions along with the forecast error variance decompositions. The results provide evidence of the presence of large number of cointegration relations between the regional house prices in the US. Moreover, in most cases, West North Central and New England appear to strongly and positively lead the house price changes in most other regions. The statement holds for Middle Atlantic which actually generates negative responses. On the other hand, house prices in East North Central and Mountain are highly influenced by changes in house prices of other regions. These results mostly hold for the dynamic period or from time horizon 0 (contemporaneous) to 35 (8.5 years). Furthermore, the real estate market in the US appears to be mainly led by regions that are influential in many other ways, such as financial, economic, etc.

Suggested Citation

  • Zohrabyan, Tatevik & Leatham, David J. & Bessler, David A., 2008. "Cointegration Analysis of Regional House Prices in U.S," 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48138, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    • Handle: RePEc:ags:nc1007:48138
    DOI: 10.22004/ag.econ.48138
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    2. Alan Tidwell & Yan (Olivia) Lu & Junsoo Lee & Piyali Banerjee, 2023. "Nature of comovements in US state and MSA housing prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(4), pages 959-989, July.
    3. Carlos P. Barros & Luis A. Gil-Alana, 2013. "The Housing Markets in Spain and Portugal: Evidence of Persistence," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-32, November.
    4. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Floros, Christos, 2015. "Dynamic Connectedness of UK Regional Property Prices," MPRA Paper 68421, University Library of Munich, Germany.
    5. Rangan Gupta & Christophe André & Luis Gil-Alana, 2015. "Comovement in Euro area housing prices: A fractional cointegration approach," Urban Studies, Urban Studies Journal Limited, vol. 52(16), pages 3123-3143, December.
    6. Flor, Michael A. & Klarl, Torben, 2017. "On the cyclicity of regional house prices: New evidence for U.S. metropolitan statistical areas," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 134-156.
    7. Barros, Carlos Pestana & Gil-Alana, Luis A. & Payne, James E., 2012. "Comovements among U.S. state housing prices: Evidence from fractional cointegration," Economic Modelling, Elsevier, vol. 29(3), pages 936-942.
    8. Hernán Enríquez Sierra & Jacobo Campo Robledo & Antonio Avendaño Arosemena, 2015. "Relaciones regionales en los precios de vivienda nueva en Colombia," Revista Ecos de Economía, Universidad EAFIT, vol. 19(40), pages 25-47, June.
    9. Nicholas Apergis & James Payne, 2012. "Convergence in U.S. house prices by state: evidence from the club convergence and clustering procedure," Letters in Spatial and Resource Sciences, Springer, vol. 5(2), pages 103-111, July.
    10. Payne, James E., 2012. "The Long-Run Relationship among Regional Housing Prices: An Empirical Analysis of the U.S," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 42(1), pages 1-8.
    11. Francisco Blanco & Victor Martín & Guillermo Vazquez, 2016. "Regional house price convergence in Spain during the housing boom," Urban Studies, Urban Studies Journal Limited, vol. 53(4), pages 775-798, March.

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