The dynamic relationship between house prices and output: evidence from US metropolitan areas

    Nicholas Apergis Info
    Beatrice D. Simo-Kengne Info
    Rangan Gupta Info
    Tsangyao Chang Info

Abstract

This paper investigates the long-run and short-term dynamics of 351 US metropolitan statistical area housing prices in relation to personal income. We apply a panel cointegration approach on annual data from 1993 to 2011 and find a long-run relationship between local house prices and per capita personal income. The causal direction is then assessed based on an autoregressive distributed lag specification that also accommodates for error-correction. Results from Granger-causality tests reveal the existence of a bi-directional causality between real house prices and real per capita personal income over both long and short-horizons. Our results continue to be robust, when our bivariate system is extended to include additional MSA-level (employment and population) and national-level variables (real stock price and mortgage interest rate). We conclude that changes in personal income can predict house price movements and vice versa.

First Publish Online: 23 Dec 2015

Keywords:

Real house prices, Real personal income per capita, Panel cointegration, Panel causality

How to Cite

Apergis, N., Simo-Kengne, B. D., Gupta, R., & Chang, T. (2015). The dynamic relationship between house prices and output: evidence from US metropolitan areas. International Journal of Strategic Property Management, 19(4), 336-345. https://doi.org/10.3846/1648715X.2015.1072857

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December 23, 2015
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2015-12-23

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How to Cite

Apergis, N., Simo-Kengne, B. D., Gupta, R., & Chang, T. (2015). The dynamic relationship between house prices and output: evidence from US metropolitan areas. International Journal of Strategic Property Management, 19(4), 336-345. https://doi.org/10.3846/1648715X.2015.1072857

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