Shifting Drivers for US House Prices

Abstract

Historically, US house prices track key housing and economic factors such as housing starts, housing inventory, employment, interest rates, and consumer price indices, to name a few. During the past two years, the US economy has gyrated through myriad distortions resulting from the government’s various attempts to control the pandemic. Most recently, the administration has adopted policies that have further disrupted the economy, leading to increases in consumer prices and shortages of goods. We study the potential change in the connection between US house prices and key drivers before and after the onset of the pandemic. We take several approaches to this question, including studying cross-correlations of the multivariate time series, estimating a seasonal ARIMA model, and fitting seemingly unrelated regressions. Finally, we model house prices as a univariate time series. We find some evidence of a change in the association between house prices and other economic measures from before to after the covid response.