(A)Synchronous Housing Markets of Global Cities

Bhatt, Vipul and Kishor, N. Kundan (2021): (A)Synchronous Housing Markets of Global Cities.

Abstract

In this paper we examine house price synchronization in 15 global cities using real house price data from 1995:Q1-2020:Q2. We find that although there is evidence for bilateral positive phase synchronization, there is no evidence for an integrated global housing market for our sample of cities. Using a hierarchical clustering approach, we identify three clusters of cities with similar housing price cycles that are not solely determined by geographic proximity. We interpret this finding as suggestive of a rather segmented housing market for the global cities in our sample. Using a dynamic factor model with time-varying stochastic volatility we decompose a city's real housing price growth into a global component, a cluster-based component, and an idiosyncratic component. For most cities in our sample, the global component plays a minor role, whereas the cluster-based factor explains a large fraction of the observed variation in real house price growth with its contribution peaking during the Great Recession of 2007-09

• Item Type: MPRA Paper
• Language: English
• Keywords: Global Housing Market, House Price Synchronization, Cluster Analysis, Dynamic Factor Model
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C38 - Classification Methods ; Cluster Analysis ; Principal Components ; Factor Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F44 - International Business Cycles; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R30 - General

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