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Regional house price segmentation and convergence in the US: a new approach
Miles, William
Miles, William
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2015-01
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Article
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Keywords
Regional house prices,Segmentation,Integration
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Citation
Miles, William. 2013. Regional house price segmentation and convergence in the US: a new approach -- The Journal of Real Estate Finance and Economics, vol. 50:no. 1, January 2015:pp 113-128
Abstract
This paper investigates the extent of regional integration (or, conversely,
segmentation) in US home values. In contrast to some previous studies, we examine the
degree of integration in the US with a data set which runs into 2012 and thus captures
the latest period of bubble and bust, and employing a recently developed set of tools
which yield estimates which are 1) time-varying, and 2) account for differences not just
in correlation but also in amplitude between different housing markets. Our results
indicate that contrary to some previous findings, overall integration in the US was
falling, not rising over the early years of the bubble (2001–05). This lends some
credence to the “lots of local bubbles” conjecture of Greenspan that the early stages
of the bubble reflected froth in some individual markets, rather than a large underlying
national bubble. However, the late stages of the bubble exhibit a very sharp rise in
integration, so the later bubble and subsequent bust likely reflected national (or global)
factors. Finally we find substantial variation across regions in terms of how integrated
they tend to be. This comports with previous findings on the low level of integration of
regional income in the US, and the ability of home values to maintain substantial
segmentation makes the use of housing in monetary policy problematic.
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Description
Post-print. The final publication is available at Springer via DOI: 10.1007/s11146-013-9451-y
Publisher
Springer US
Journal
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The Journal of Real Estate Finance and Economics
:v.50:no.1
:v.50:no.1
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ISSN
1573-045X
0895-5638
0895-5638