Comput Econ https://doi.org/10.1007/s10614-018-9822-9 A Nationwide or Localized Housing Crisis? Evidence from Structural Instability in US Housing Price and Volume Cycles MeiChi Huang Accepted: 23 May 2018 © Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract This study provides fresh implications for the puzzle of the recent housing boom-bust cycle in the United States. It extracts housing factors from housing price and volume time series at state and regional levels under a dynamic factor model, which considers three varieties of structural instability in local housing markets. The ﬁndings suggest that state-level housing price cycles are more unstable than housing volume cycles, and the probability of rejecting stability for the Northeast is the highest among four regional housing markets. In general, the housing market forecasts based on 1988–2012 full-sample factors and time-varying coefﬁcients across pre- and post- 1999 subperiods are superior to alternatives. The factor-based forecast results provide new evidence for a nationwide housing crisis in 2007–2008, and thus suggest possible effectiveness of monetary policies in stabilizing recent housing boom-bust cycles. Keywords Housing crisis · Structural instability · Housing boom-bust cycle · Housing factor · Dynamic factor model 1 Introduction Although the house price bubble appears obvious in retrospect–all
Computational Economics – Springer Journals
Published: May 31, 2018
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