Article:

Asymmetric Causality and Asymmetric Cointegration between Income and House Prices in the United States of America

Author: Mohsen Bahmani-Oskooee, Seyed Hesam Ghodsi

Abstract:

When the U.S. house prices were rising before the Financial Crisis of 2008, Case and Shiller (2003) argued that “income growth alone explains the pattern of recent home price increases in most states”. Can then the decline in income after 2008 explain the burst and abnormal decrease in house prices? Alternatively we ask whether the effects of income on house prices are symmetric or asymmetric. We employ quarterly data from each of the states in the U.S. and nonlinear ARDL modelling approach of Shin et al. (2014) to show that indeed, household income changes do have asymmetric effects on house prices in most of the states in the U.S. While adjustment asymmetry is borne out by the results in all states, short-run impact asymmetry is evidenced in 18 states and significant long-run asymmetry in 21 states.

Keywords

House Prices, Household income, Asymmetry, Nonlinear ARDL Approach.

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