A1399
Title: Time-varying effects of housing attributes and economic environment on housing prices
Authors: Marina Friedrich - VU Amsterdam (Netherlands) [presenting]
Sean Telg - Vrije Universiteit Amsterdam (Netherlands)
Pavitram Ramdaras - Vrije Universiteit Amsterdam (Netherlands)
Bernhard van der Sluis - Erasmus University Rotterdam (Netherlands)
Yicong Lin - Maastricht University (Netherlands)
Abstract: A flexible framework is proposed that allows for the relationship between housing prices and their determinants to vary over time. The model incorporates housing-specific characteristics and macroeconomic variables while accounting for a gradual global trend that reflects the unobserved external environment. The trend and coefficient curves are estimated by local linear estimation and propose a bootstrap procedure for conducting inference. By employing monthly data from the Dutch housing market, covering 60 municipalities from 2006 to 2020, the proposed models show the capability to accurately describe the comovements of housing prices. The results show strong statistical evidence of time variation in the effects of housing attributes and macroeconomic variables on prices throughout the entire sample period, revealing that the unemployment rate played a crucial role between approximately 2012 and 2017. The extracted latent global trend reveals a significant influence on the economic environment and takes the shape of a leading indicator of the property market index. Moreover, it is found that both the housing characteristics and the external environment explain comparably high proportions of the variation in housing prices, which stresses the importance of including both components in empirical analyses.
