The long-run relationship between house prices and income
Subtitle: evidence from local housing markets
By: Joshua Gallin.
Series: Finance and economics discussion series ;; 2003-17; Finance and economics discussion series (Online) ;; 2003-17.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Subjects: Housing -- Prices -- United States.; Income -- United States.
Description: "The proposition that "housing prices can't continue to outpace growth in household income" (Wall Street Journal; July 25, 2002) is the received wisdom among many housing-market observers.  More formally, many in the housing literature argue that house prices and income are cointegrated.  In this paper, I show that the data do not support this view.  Standard tests using 27 years of national-level data do not find evidence of cointegration.  However, it is known that tests for cointegration have low power, especially in small samples.  I use panel-data tests for cointegration that have been shown to be more powerful than their standard time-series counterparts to test for cointegration in a panel of 95 metro areas over 23 years.  Using a bootstrap approach to allow for cross-correlations in city-level house-price shocks, I show that even these more powerful tests do not reject the hypothesis of no cointegration.  Thus the error-correction specification for house prices and income commonly found in the literature may be inappropriate"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 7/27/2004.
Also available in print.
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Mode of access: World Wide Web.