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Effects of Uncertainty and Labor Demand Shocks on the Housing Market

Author

Listed:
  • Gabriel Lee
  • Binh Nguyen Thanh
  • Johannes Strobel

Abstract

This paper investigates the simultaneous effects of uncertainty and locallabor demand shocks on the U.S. housing market. We use binaryuncertainty indicators and a Bartik (1991) index to quantify bothuncertainty and labor demand shocks. Controlling for a broad set ofvariables in fixed-effects regressions, we find uncertainty shocks exhibitsmall adverse level effects, where housing prices and median sell pricesdecrease in the amount of 1.4% and 1.8%, respectively, and thepercentage loss of houses selling increase by .52%-points. Moreimportantly, however, when both shocks are introduced the effects ofuncertainty shocks on the housing market dominate that of local labordemand shocks on housing prices, median sell prices, the share of housesselling for loss, transactions and homes sold as foreclosure. These resultslends to the support for the presence of real options effects in the housingmarket.

Suggested Citation

  • Gabriel Lee & Binh Nguyen Thanh & Johannes Strobel, 2016. "Effects of Uncertainty and Labor Demand Shocks on the Housing Market," ERES eres2016_322, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2016_322
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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