A national or local phenomenon? A comparison of the US and the Chinese housing markets

ABSTRACT

This article investigates the common movements of house prices across cities as well as the macroeconomic underpinnings of the comovements in the US and China. Our empirical results indicate more differences than similarities between the US and the Chinese housing markets. The results from a Bayesian dynamic latent factor model indicate that the fluctuations of house prices across cities in the US are more a national phenomenon, while the dynamics of house prices across cities in China are mainly driven by the city-specific component. We further use VAR models to compare the roles of the underlying determinants in these two housing markets. The results show that the roles of monetary policy shocks and aggregate fluctuations in driving the common movements of house prices across cities differ substantially between the US and China at both short and long horizons.

KEYWORDS:

• House prices
• comovements
• monetary policy
• aggregate fluctuations

JEL CLASSIFICATION:

• E44
• E52
• R31

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ We conduct robustness tests including: changing the ordering of variables; using consumption expenditure instead of GDP; and using simultaneously long-term, short-term interest rates and money supply as the proxy of monetary policy. Broadly speaking, the results remain very similar.

Additional information

Funding

This work is supported by the Natural Science Foundation of Guangdong Province [Grant no. 2015A030310444], the Social Sciences Funding Program of Guangdong Province [Grant no. GD14XYJ03], and the Fundamental Research Funds for the Central Universities (Grant no. 15JNQM009).