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Modeling House Price Synchronization across the U.S. States and their Time-Varying Macroeconomic Linkages

  • Hardik A. Marfatia EMAIL logo

Abstract

This paper analyzes the time-varying impact of macroeconomic forces on the synchronization in housing movements across all the U.S. states. Using a Bayesian modeling approach, the house price movements are decomposed into national, regional and state-specific factors. We then analyze the time-varying impact of macroeconomic forces on these national and regional factors. Evidence suggests that in several Western and Eastern states the house price variations are dominated by the national factor, whereas the regional factor dominates the Southern and Midwestern markets. These factors are found to have a time-varying relationship with most macroeconomic indicators with particularly pronounced time-variation caused by national house prices, inflation rate and consumer sentiments.

JEL Classifications: C32; E32; R30

Corresponding author:Hardik A. Marfatia, Department of Economics, Northeastern Illinois University, 5500 N St Louis Ave, BBH 344G, Chicago, IL60625, USA, E-mail:

Acknowledgments

We acknowledge valuable inputs from the anonymous referee.

Appendix
Table 1:

Granger causality test: National factor

The table reports the test results of Granger causality of the National factor and macroeconomy.

Null HypothesisObsF-StatisticProb.
National HPI does not Granger Cause National Factor1361.834740.02730
National Factor does not Granger Cause National HPI1.111720.35120
Real GDP does not Granger Cause National Factor1361.518990.09270
National Factor does not Granger Cause Real GDP2.745460.00050
IIP does not Granger Cause National Factor1361.408440.13770
National Factor does not Granger Cause IIP1.614950.06470
Buss Loans does not Granger Cause National Factor1361.078830.38420
National Factor does not Granger Cause Buss Loans1.301680.19740
Short-term Rate does not Granger Cause National Factor1360.788080.72140
National Factor does not Granger Cause Short-term Rate1.341920.17280
Long-term Rate does not Granger Cause National Factor1360.703780.81320
National Factor does not Granger Cause Long-term Rate1.089330.37350
Mortgage Rate does not Granger Cause National Factor1361.051260.41310
National Factor does not Granger Cause Mortgage Rate0.707520.80940
PCE Deflator does not Granger Cause National Factor1360.936310.54410
National Factor does not Granger Cause PCE Deflator1.048770.41580
GDP Deflator does not Granger Cause National Factor1361.541750.08520
National Factor does not Granger Cause GDP Deflator1.161260.30500
CPI does not Granger Cause National Factor1361.091210.37160
National Factor does not Granger Cause CPI1.367320.15860
Consumer Senti. does not Granger Cause National Factor1270.968900.50640
National Factor does not Granger Cause Consumer Senti.0.958720.51820
US Leading Index does not Granger Cause National Factor1121.074420.39450
National Factor does not Granger Cause US Leading Index1.541800.09420
Long-Short Spread does not Granger Cause National Factor961.988920.02310
National Factor does not Granger Cause Long-Short Spread2.278230.00840
Table 2:

Granger causality test: Northeast factor

The table reports the test results of Granger causality of the Northeast factor and macroeconomy.

Null Hypothesis:ObsF-StatisticProb.
National HPI does not Granger Cause Northeast Factor1362.446250.00200
Northeast Factor does not Granger Cause National HPI1.341030.17330
Real GDP does not Granger Cause Northeast Factor1363.546160.00002
Northeast Factor does not Granger Cause Real GDP1.289050.20570
IIP does not Granger Cause Northeast Factor1362.436910.00210
Northeast Factor does not Granger Cause IIP1.391420.14600
Buss Loans does not Granger Cause Northeast Factor1361.462450.11380
Northeast Factor does not Granger Cause Buss Loans1.059220.40460
Short-term Rate does not Granger Cause Northeast Factor1365.112310.00000
Northeast Factor does not Granger Cause Short-term Rate2.049870.01120
Long-term Rate does not Granger Cause Northeast Factor1362.842260.00040
Northeast Factor does not Granger Cause Long-term Rate1.604260.06740
Mortgage Rate does not Granger Cause Northeast Factor1363.279720.00005
Northeast Factor does not Granger Cause Mortgage Rate1.668610.05270
PCE Deflator does not Granger Cause Northeast Factor1360.859390.63680
Northeast Factor does not Granger Cause PCE Deflator0.871270.62250
GDP Deflator does not Granger Cause Northeast Factor1361.225900.25120
Northeast Factor does not Granger Cause GDP Deflator1.402290.14070
CPI does not Granger Cause Northeast Factor1361.309070.19270
Northeast Factor does not Granger Cause CPI0.944550.53430
Consumer Senti. does not Granger Cause Northeast Factor1271.032950.43440
Northeast Factor does not Granger Cause Consumer Senti.0.888290.60180
US Leading Index does not Granger Cause Northeast Factor1121.965800.02000
Northeast Factor does not Granger Cause US Leading Index0.929550.55340
Long-Short Spread does not Granger Cause Northeast Factor961.195050.29350
Northeast Factor does not Granger Cause Long-Short Spread0.770910.73470
Table 3:

Granger causality test: Midwest factor

The table reports the test results of Granger causality of the Midwest factor and macroeconomy.

Null HypothesisObsF-StatisticProb.
National HPI does not Granger Cause Midwest Factor1362.222070.00540
Midwest Factor does not Granger Cause National HPI2.702680.00070
Real GDP does not Granger Cause Midwest Factor1361.747920.03860
Midwest Factor does not Granger Cause Real GDP0.723790.79260
IIP does not Granger Cause Midwest Factor1362.134660.00780
Midwest Factor does not Granger Cause IIP1.802840.03100
Buss Loans does not Granger Cause Midwest Factor1360.417050.98580
Midwest Factor does not Granger Cause Buss Loans1.317870.18720
Short-term Rate does not Granger Cause Midwest Factor1362.613850.00100
Midwest Factor does not Granger Cause Short-term Rate1.910560.02000
Long-term Rate does not Granger Cause Midwest Factor1361.574710.07540
Midwest Factor does not Granger Cause Long-term Rate2.445150.00200
Mortgage Rate does not Granger Cause Midwest Factor1361.513840.09450
Midwest Factor does not Granger Cause Mortgage Rate1.759830.03680
PCE Deflator does not Granger Cause Midwest Factor1361.760780.03670
Midwest Factor does not Granger Cause PCE Deflator0.436360.98150
GDP Deflator does not Granger Cause Midwest Factor1361.695880.04740
Midwest Factor does not Granger Cause GDP Deflator0.729880.78620
CPI does not Granger Cause Midwest Factor1361.450120.11890
Midwest Factor does not Granger Cause CPI0.230560.99980
Consumer Senti. does not Granger Cause Midwest Factor1270.924040.55910
Midwest Factor does not Granger Cause Consumer Senti.0.939170.54120
US Leading Index does not Granger Cause Midwest Factor1120.832840.66700
Midwest Factor does not Granger Cause US Leading Index1.118450.35160
Long-Short Spread does not Granger Cause Midwest Factor961.741590.05400
Midwest Factor does not Granger Cause Long-Short Spread0.983040.49530
Table 4:

Granger causality test: South factor

The table reports the test results of Granger causality of the South factor and macroeconomy.

Null HypothesisObsF-StatisticProb.
National HPI does not Granger Cause South Factor1361.395340.14410
South Factor does not Granger Cause National HPI1.236870.24280
Real GDP does not Granger Cause South Factor1362.014390.01300
South Factor does not Granger Cause Real GDP1.149320.31580
IIP does not Granger Cause South Factor1362.261310.00450
South Factor does not Granger Cause IIP1.386250.14870
Buss Loans does not Granger Cause South Factor1362.430240.00220
South Factor does not Granger Cause Buss Loans1.397030.14320
Short-term Rate does not Granger Cause South Factor1363.912510.00000
South Factor does not Granger Cause Short-term Rate1.264980.22220
Long-term Rate does not Granger Cause South Factor1363.984570.00000
South Factor does not Granger Cause Long-term Rate2.470340.00180
Mortgage Rate does not Granger Cause South Factor1363.266090.00006
South Factor does not Granger Cause Mortgage Rate1.563200.07870
PCE Deflator does not Granger Cause South Factor1361.162700.30370
South Factor does not Granger Cause PCE Deflator2.274290.00430
GDP Deflator does not Granger Cause South Factor1361.538620.08620
South Factor does not Granger Cause GDP Deflator2.177790.00650
CPI does not Granger Cause South Factor1361.516940.09340
South Factor does not Granger Cause CPI1.519690.09250
Consumer Senti. does not Granger Cause South Factor1270.940200.54000
South Factor does not Granger Cause Consumer Senti.0.864610.63030
US Leading Index does not Granger Cause South Factor1121.382140.16070
South Factor does not Granger Cause US Leading Index0.866630.62730
Long-Short Spread does not Granger Cause South Factor961.074930.40010
South Factor does not Granger Cause Long-Short Spread1.341910.19340
Table 5:

Granger causality test: West factor

The table reports the test results of Granger causality of the West factor and macroeconomy.

Null HypothesisObsF-StatisticProb.
National HPI does not Granger Cause West Factor1361.637000.05950
West Factor does not Granger Cause National HPI1.151400.31390
Real GDP does not Granger Cause West Factor1362.822980.00040
West Factor does not Granger Cause Real GDP1.286150.20760
IIP does not Granger Cause West Factor1364.519440.00000
West Factor does not Granger Cause IIP0.888400.60180
Buss Loans does not Granger Cause West Factor1361.679130.05060
West Factor does not Granger Cause Buss Loans0.948740.52930
Short-term Rate does not Granger Cause West Factor1365.813140.00000
West Factor does not Granger Cause Short-term Rate1.625430.06220
Long-term Rate does not Granger Cause West Factor1364.397760.00000
West Factor does not Granger Cause Long-term Rate2.442310.00210
Mortgage Rate does not Granger Cause West Factor1363.275740.00005
West Factor does not Granger Cause Mortgage Rate2.118770.00840
PCE Deflator does not Granger Cause West Factor1361.142770.32170
West Factor does not Granger Cause PCE Deflator0.745650.76920
GDP Deflator does not Granger Cause West Factor1362.102740.00900
West Factor does not Granger Cause GDP Deflator1.345520.17070
CPI does not Granger Cause West Factor1361.471520.11010
West Factor does not Granger Cause CPI0.831930.66980
Consumer Senti. does not Granger Cause West Factor1271.408620.14070
West Factor does not Granger Cause Consumer Senti.0.616460.89030
US Leading Index does not Granger Cause West Factor1122.385450.00390
West Factor does not Granger Cause US Leading Index0.800990.70390
Long-Short Spread does not Granger Cause West Factor961.451070.13880
West Factor does not Granger Cause Long-Short Spread1.066160.40880

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Received: 2017-09-04
Accepted: 2020-08-10
Published Online: 2020-09-14

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