Homebuilders’ Sentiment and Housing Activity: Evidence of Differential Regional Effects

Abstract

The primary purpose of this study is to explore whether a shock to homebuilder sentiment generates similar effects on single-family housing activities across regions in the United States. Our findings show that of the four census regions, the South is the most sensitive to a sentiment shock, whereas the Northeast is the least sensitive. Regional differences in economic as well as noneconomic factors appear to drive the differential impacts.

Keywords:

• Homebuilder sentiment
• regulation
• FAVAR

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Another factor that can potentially lead to regional differences in housing activities is the cost of building. However, Gyourko and Saiz (2006) found that the differences in construction costs across regions are not substantial. Glaeser and Gyourko (2018) suggested that it is sensible to assume a single production cost of housing across the U.S.

2 We checked for multicollinearity between regulation and geography and found strong evidence of multicollinearity between them.