Essays on the time series behavior of house prices in the U.S. /

Abstract

This dissertation is comprised of three essays regarding issues on house prices, with the focus of the analysis at the state and regional levels. The first say, "The Effects of Monetary Policy on Housing Using State Level Data," investigates how individual states respond to national policy actions. State level analysis can provide policy makers with additional information to use when making national forecasts. Results from impulse response functions indicate a wide range of possibilities from the states, in response to an exogenous monetary policy shock. The second paper, "The Effects of Adjustable Rate Mortgages on House Price Inflation," deals with house prices and the mortgage market. At the peak of the housing boom, adjustable rate mortgages represented more than two thirds of the subprime market and more than 20% of the overall mortgage market. The focus of this paper is therefore to study what determines adjustable rate mortgages and to address the possibility of a feedback effect between house prices and adjustable rate mortgages. The results are consistent with earlier finding on the importance of the spread between fixed rate and adjustable rate mortgages as the key determinant of the share of adjustable rate mortgages in the mortgage market. The assertion of the potential for a simultaneous relationship between house prices and adjustable rate mortgages is a plausible one. The third essay "Structural time series models of regional income and house prices," studies regional house prices, and regional income and the relationships between them. The use of unobserved components model gives us the tools to study unobserved factors affecting the relationship between house prices and income that is not often considered in traditional regressions. It also gives policy makers additional useful information to consider when making decisions. Results indicate no cointegrating relationships exist in regional income and regional house prices. Results also indicate that