What drives metropolitan house prices in Bork/Mller California? - PowerPoint PPT Presentation

CA house prices What drives metropolitan house prices in Bork/Møller California? Motivation Research question Takeaway Overview Model Lasse Bork, Aalborg University Empirical results: Overview Stig V. Møller, Aarhus University & CREATES. IRF Historical decomposition Conclusion Housing, household debt and policy conference 2017, RBNZ Updated paper to appear on my webpage and SSRN

CA house prices Motivation in general Bork/Møller � Are regional house prices primarily driven by regional Motivation economic conditions? Research question Or, are there significant spillover effects from the Takeaway aggregate economy to the regional house prices? Overview � In general, we are interested in getting a better Model understanding of the links between regional house prices Empirical results: Overview and the aggregate-regional economy IRF Historical � The challenge in addressing these research questions: decomposition Conclusion � Many potential determinants of regional house prices: income, various (un)employment measures, short-term and long-term interest rates, credit, building permits, houses sold relative to houses for sale, consumer sentiment, housing sentiment, etc, etc � In this paper we try to uncover - using a large dimensional dynamic factor model - the main structural drivers (shocks) behind a particular regional housing market (California).

CA house prices Motivation in general Bork/Møller � Are regional house prices primarily driven by regional Motivation economic conditions? Research question Or, are there significant spillover effects from the Takeaway aggregate economy to the regional house prices? Overview � In general, we are interested in getting a better Model understanding of the links between regional house prices Empirical results: Overview and the aggregate-regional economy IRF Historical � The challenge in addressing these research questions: decomposition Conclusion � Many potential determinants of regional house prices: income, various (un)employment measures, short-term and long-term interest rates, credit, building permits, houses sold relative to houses for sale, consumer sentiment, housing sentiment, etc, etc � In this paper we try to uncover - using a large dimensional dynamic factor model - the main structural drivers (shocks) behind a particular regional housing market (California).

CA house prices Motivation in general Bork/Møller � Are regional house prices primarily driven by regional Motivation economic conditions? Research question Or, are there significant spillover effects from the Takeaway aggregate economy to the regional house prices? Overview � In general, we are interested in getting a better Model understanding of the links between regional house prices Empirical results: Overview and the aggregate-regional economy IRF Historical � The challenge in addressing these research questions: decomposition Conclusion � Many potential determinants of regional house prices: income, various (un)employment measures, short-term and long-term interest rates, credit, building permits, houses sold relative to houses for sale, consumer sentiment, housing sentiment, etc, etc � In this paper we try to uncover - using a large dimensional dynamic factor model - the main structural drivers (shocks) behind a particular regional housing market (California).

CA house prices Motivation in general Bork/Møller � Are regional house prices primarily driven by regional Motivation economic conditions? Research question Or, are there significant spillover effects from the Takeaway aggregate economy to the regional house prices? Overview � In general, we are interested in getting a better Model understanding of the links between regional house prices Empirical results: Overview and the aggregate-regional economy IRF Historical � The challenge in addressing these research questions: decomposition Conclusion � Many potential determinants of regional house prices: income, various (un)employment measures, short-term and long-term interest rates, credit, building permits, houses sold relative to houses for sale, consumer sentiment, housing sentiment, etc, etc � In this paper we try to uncover - using a large dimensional dynamic factor model - the main structural drivers (shocks) behind a particular regional housing market (California).

CA house prices Motivation in general Bork/Møller � Are regional house prices primarily driven by regional Motivation economic conditions? Research question Or, are there significant spillover effects from the Takeaway aggregate economy to the regional house prices? Overview � In general, we are interested in getting a better Model understanding of the links between regional house prices Empirical results: Overview and the aggregate-regional economy IRF Historical � The challenge in addressing these research questions: decomposition Conclusion � Many potential determinants of regional house prices: income, various (un)employment measures, short-term and long-term interest rates, credit, building permits, houses sold relative to houses for sale, consumer sentiment, housing sentiment, etc, etc � In this paper we try to uncover - using a large dimensional dynamic factor model - the main structural drivers (shocks) behind a particular regional housing market (California).

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller Motivation Research question US house price index (1986:III = 100) Takeaway 450 Californian house price index (1986:III = 100) Overview 400 Model Empirical results: 350 Overview IRF 300 Historical decomposition Conclusion 250 200 150 100 1990 1995 2000 2005 2010 2015

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller Motivation Mean growth rate in house prices: 1986Q3-2016Q3. Nominal. Annualized. Research question Takeaway Overview Model Empirical results: Overview IRF Historical decomposition Conclusion

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller Motivation Boom : Mean growth rate in house prices: 2000Q1-2006Q2. Nominal. Annualized. Research question Takeaway Overview Model Empirical results: Overview IRF Historical decomposition Conclusion

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller Motivation Bust : Mean growth rate in house prices: 2006Q3-2009Q3. Nominal. Annualized. Research question Takeaway Overview Model Empirical results: Overview IRF Historical decomposition Conclusion

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller 20.00 Motivation Crescent City, CA MiSA Research question 16.00 High Takeaway Eureka−Arcata−Fortuna Redding Susanville Overview 12.00 Red Bluff Model Chico Ukiah Truckee−Grass Valley YC Empirical results: 8.00 Clearlake SRAA Yuba City Overview Sacramento−−Roseville−−Arden−Arcade SRAA Santa Rosa Napa IRF SRAA Vallejo−Fairfield Historical 4.00 San Rafael Sonora decomposition OHB Stockton−Lodi San Francisco−Redwood City−South San Francisco Oakland−Hayward−Berkeley Modesto Conclusion SFRCSSF SJSSC Merced Madera Santa Cruz−Watsonville 0.00 Fresno San Jose−Sunnyvale−Santa Clara Salinas Visalia−Porterville Hanford−Corcoran −4.00 San Luis Obispo−Paso Robles−Arroyo Grande Bakersfield RSBO −8.00 Santa Maria−Santa Barbara Oxnard−Thousand Oaks−Ventura Los Angeles−Long Beach−Glendale Riverside−San Bernardino−Ontario −12.00 Anaheim−Santa Ana−Irvine El Centro San Diego−Carlsbad −16.00 Low −20.00

CA house prices Motivation: Regional differences in house prices in 6 graphs Bork/Møller 20.00 Motivation Crescent City, CA MiSA Research question 16.00 High Takeaway Eureka−Arcata−Fortuna Redding Susanville Overview 12.00 Red Bluff Model Chico Ukiah Truckee−Grass Valley YC Empirical results: 8.00 Clearlake SRAA Yuba City Overview Sacramento−−Roseville−−Arden−Arcade SRAA Santa Rosa Napa IRF SRAA Vallejo−Fairfield Historical 4.00 San Rafael Sonora decomposition OHB Stockton−Lodi San Francisco−Redwood City−South San Francisco Oakland−Hayward−Berkeley Modesto Conclusion SFRCSSF SJSSC Merced Madera Santa Cruz−Watsonville 0.00 Fresno San Jose−Sunnyvale−Santa Clara Salinas Visalia−Porterville Hanford−Corcoran −4.00 San Luis Obispo−Paso Robles−Arroyo Grande Bakersfield RSBO −8.00 Santa Maria−Santa Barbara Oxnard−Thousand Oaks−Ventura Los Angeles−Long Beach−Glendale Riverside−San Bernardino−Ontario −12.00 Anaheim−Santa Ana−Irvine El Centro San Diego−Carlsbad −16.00 Low −20.00