Finance & Financial Econometrics: 
Time: 10.30 am
Date: 22th of June 2023
Room 3001

Sean TELG (Vrije Universiteit Amsterdam) “Time-Varying Effects of Housing Attributes and Economic Environment on Housing Prices”

Abstract : The housing market is an essential sector of the economy which has been through several crises in the past. Understanding the development of housing prices is therefore an important task. In this paper, we study the determinants of prices in this market. We propose a flexible framework that allows the relationship between housing prices and their determinants to be time-varying. We include housing-specific characteristics and a set of macroeconomic variables relevant to the housing market. Our specification also allows for a smooth global trend, representing the unobserved external environment. We estimate the trend and coefficient curves by a local linear dummy variable approach and propose a bootstrap procedure to conduct inference. Using monthly data of the Dutch housing market with 60 municipalities from 2006 to 2020, we find that the proposed model accurately describes housing price comovements. The extracted latent global trend shows that prices were significantly affected by the economic environment, such as the unemployment rate, from around 2010 until 2017. We also find strong statistical evidence of significant time variation in the effects of housing attributes and macroeconomic variables on prices throughout the sample period. This underlines the importance of modeling time variation in future related studies. Finally, we find that both the housing characteristics and the external environment explain similar proportions of the variation in the housing prices, which stresses the importance of including both components in a model.

Jean-Michel ZAKOIAN (CREST)

Sponsors:
CREST