Price Exuberance and Contagion across Housing Markets: Evidence from US Metropolitan Areas

Authors

Md Shahedur R. Chowdhury
Damian S. Damianov
Diego Escobari, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

11-14-2022

Abstract

Contagion occurs when cross-market correlation increases because of a shock to one market. Identifying shocks as episodes of house price exuberance, we provide evidence for contagion effects among the largest metropolitan markets in the US. We find that changes in income, interest rates, and unemployment also create contagion effects. These empirical findings are consistent with a model in which shocks to house prices and economic variables relaxes households down payment constraints and increases household mobility and housing demand. These effects are established in an equilibrium framework in which house prices and household choices are determined endogenously, and we account for this endogeneity in our empirical study. Our results are robust to various empirical specifications, and we discuss the implications of these findings for households and investors.

Comments

Copyright © 2022, The Author(s), under exclusive licence to Springer Science Business Media, LLC, part of Springer Nature

https://rdcu.be/c1TRC

Recommended Citation

Chowdhury, M.S.R., Damianov, D.S. & Escobari, D. Price Exuberance and Contagion across Housing Markets: Evidence from US Metropolitan Areas. J Real Estate Finan Econ (2022). https://doi.org/10.1007/s11146-022-09925-w

Publication Title

The Journal of Real Estate Finance and Economics

DOI

10.1007/s11146-022-09925-w