The Dynamics of Housing Prices
We analyze the prices of owner-occupied housing in 97 metropolitan areas between 1980 and 2011. Our tests indicate that price changes exhibit positive serial correlation at the one year intervals, with subsequent reversals of price changes over longer intervals. Consistent with our simple model, regional differences in observed price patterns reflect differences in the serial correlation of the demand shocks as well as the elasticity of supply responses.
We acknowledge the helpful comments from Su Han Chan, Sing Tien Foo, David Frame, Richard Gil, Christopher Parsons and seminar participants at Chinese Academy of Sciences, Chinese Academy of Social Sciences, Colorado State University, Johns Hopkins University, Massey University, Shanghai University of Finance and Economics, 2009 AREUEA/AsRES Joint Meeting and 2010 GCREC Annual Meeting. We thank Jiajin Chen, Yalan Feng and Mariya Letdin for their research assistance on this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.