لافت بالون 99: سیاست های پولی و رونق قیمت خانه در سراسر ایالت آمریکا

We use a dynamic factor model estimated on quarterly state-level data from 1986 to 2005 via Bayesian methods to disentangle the relative importance of the common component in OFHEO house price movements from local (state- or region-specific) shocks. We find that historically movements in house prices were mainly driven by the local component. The recent period (2001–2005) has been different: the increase in house prices is a national phenomenon. We use a VAR to investigate the extent to which expansionary monetary policy is responsible for this phenomenon. We find the impact of policy shocks on house prices to be small in comparison with the magnitude of recent fluctuations.

In some U.S. metropolitan areas house prices increased dramatically during the last few years. The increase in house prices is substantial even if one looks at the average state-level price, which smooths out the differences across local markets within each state. The dark bars in Fig. 1 show the annualized average growth rates from the first quarter of 2001 to the last quarter of 2005 in the Office of Federal Housing Enterprise Oversight (OFHEO) house price indexes, deflated by the core PCE inflation, for the 48 contiguous U.S. states. In this five-year period house price indexes increased more than 10% per year in several states on both the East and the West Coasts, notably California, Florida, Nevada, Maryland, Rhode Island, New Jersey and Virginia. The rise in house prices has been very uneven across the nation, with some states, like Texas and Ohio, growing at 2% per year. If we compare the growth in house prices in the last five years with the average growth since 1986, we find that states like Florida have grown two and half times their average, while other states, like Michigan, have grown 25% less than average.From the perspective of the current debate, an important question is whether the widespread, but not homogeneous, increase in house prices reflects a national phenomenon or rather, in the words of Chairman Greenspan, a collection of “local bubbles.” The answer to this question has important policy implications. “Local bubbles” are most likely attributable to local factors, i.e., circumstances that are specific to each geographic market, rather than to monetary policy, which is the same across the nation. On the contrary, if the boom in house prices is a national phenomenon, monetary policy may well be a likely suspect. To address the issue of a potential national housing cycle we estimate a dynamic factor model in the spirit of Geweke (1977), Sargent and Sims (1977), and Stock and Watson (1989), on state-level OFHEO house price indexes from the mid-80s to the end of 2005. We then use the factor model to disentangle the component of the increase in the value of housing that is common to all states from the component that is idiosyncratic, i.e. specific to each state. The latter component is meant to capture the “local bubbles” Chairman Greenspan refers to, while the former captures co-movement across all states, and therefore, potentially, what has been referred to as a “national bubble.” We find that historically movements in house prices have mainly been driven by the local (state- or region-specific) component. Indeed, growth rates in OFHEO house price index are far less synchronized across states than are the growth rates in real per capita income, which are a measure of the business cycle at the state level. However, the recent period has been different in this regard. While for a number of states local factors are still very important, for many states that experienced large increases in house prices a substantial fraction of these increases is attributable to the national factor. How can we reconcile this finding with the fact that increases in house prices have been uneven across states? Of course, part of the cross-state heterogeneity is due to local factors. But about 60% of the heterogeneity is due to the fact that states have different exposures to the common cycle: some states, like Iowa, Nebraska, or Oklahoma, are barely affected by the common cycle, while others, for instance most states in the north-east, are strongly affected. Since in the recent period the common component of the growth in house prices across states has been sizable, we ask to what extent monetary policy is behind this co-movement. Of course there are many other potential causes of the house price boom, such as mortgage market innovations for instance, but here we focus on one of them only: monetary policy. We follow Bernanke and Boivin (2003) and estimate a VAR where the common factor in house prices is one of the variables, while the other variables measure the stance of monetary policy (the Federal Funds interest rate, money supply), aggregate U.S. inflation and output, and the 30-year mortgage rate. We identify monetary policy shocks using sign restrictions á la Uhlig (2005) and Canova and De Nicoló (2002). Perhaps not surprisingly, we find that monetary policy has been expansionary in the recent period, in the sense that more deviations from the implied policy rule have been on the side of “loose” rather than “tight” monetary policy. The analysis of impulse responses shows that expansionary monetary policy shocks lead to increase in the housing factor. We then perform the following counterfactual thought experiment: what would have been the alternative path of the housing factor had there not been any monetary policy shocks from the first quarter of 2001 onward? And, in turn, what would have been the counterfactual growth in house prices across states? The results from this counterfactual experiment indicate that the impact of monetary policy shocks on house prices is non-negligible, but overall fairly small in comparison with the magnitude of the price increase over the last five years. Therefore, our analysis suggests that expansionary monetary policy is not behind the recent boom in house prices. It is important to stress the following limitation of our findings. We do not conclude that the low interest rate environment experienced by the U.S. economy is not responsible for the housing boom. Here, we only consider the component of the low interest rate that is attributable to policy shocks—that is, to the Fed deviating from its historical policy rule in an expansionary way. Had the Fed followed a different rule, the results might have been different. But this is a much more difficult question that goes beyond the scope of this paper. While there are established literatures studying the effect of housing on asset pricing, portfolio choice, business cycles and consumption, the literature on the relationship between housing prices and monetary policy is fairly limited. Chirinko et al. (2004) study the interrelationship between stock prices, house prices, and real activity in a 13 country sample. Their primary focus is in determining the role asset prices play in formulating monetary policy. Iacoviello and Minetti (2003) document the role that the housing market plays in creating a credit channel for monetary policy. Their empirical analysis uses a sample of four countries that does not include the U.S. As in this paper, Iacoviello (2005) estimates a VAR to assess the impact of monetary policy shocks on housing prices. Iacoviello estimates a VAR in interest rates, inflation, and detrended output and house prices using quarterly data from 1974 to 2003. He then identifies monetary policy shocks using a Choleski decomposition with the interest rate ordered first, and finds that policy shocks have a significant effect on house prices. Our VAR results complement those of Iacoviello, as we consider different data sets and identification approaches. In addition, we provide evidence on the impact of policy shocks at the state level, with particular emphasis on the recent boom. Perhaps the closest study to ours is Fratantoni and Schuh (2003) who study the effects of monetary policy on regions in the U.S. from 1966 to 1998. They find that the response of housing investment to monetary policy varies by region. Our paper differs from the previous literature both in terms of methodology and of focus. In terms of methodology, we use a factor model to extract the common cycle in house price fluctuations. In terms of focus, like Fratantoni and Schuh—and unlike Chirinko et al. (2004), Iacoviello and Minetti (2003), and Iacoviello (2005)—we are interested in the regional differences in the response of house prices to policy shocks. Differently from all these papers, we are particularly interested in the role of monetary policy in the latest housing boom. The remainder of the paper is as follows. Section 2 describes the dynamic factor model; Section 3 describes the data, Section 4 the empirical results, and Section 5 concludes.

We use a dynamic factor model estimated via Bayesian methods to disentangle the relative importance of the common component in OFHEO house price movements from state- or region-specific shocks. Our sample consists of quarterly data from 1986 to 2005. We find that historically fluctuations in house prices have mainly been driven by the local (state- or region-specific) component. Indeed, growth rates in OFHEO house price index are less synchronized across states than are the growth rates in real per capita income, which are a measure of the business cycle at the state level. In the recent (2001–2005) period, however, “local bubbles” have been important in some states, but that overall the increase in house prices is a national phenomenon. We then use a VAR to investigate the extent to which expansionary monetary policy is responsible for the common component in house price movements. We find the impact of policy shocks on house prices to be small relative to the size of the recent housing price increase.