publication . Report . 2016

Real Options Effect of Uncertainty and Labor Demand Shocks on the Housing Market

Lee, Gabriel; Nguyen Thanh, Binh; Strobel, Johannes;
  • Published: 16 Dec 2016
  • Country: Germany
This paper shows that uncertainty affects the housing market in two significant ways. First, uncertainty shocks adversely affect housing prices but not the quantities that are traded. Controlling for a broad set of variables in fixed-effects regressions, we find that uncertainty shocks reduce housing prices and median sales prices in the amount of 1.4% and 1.8%, respectively, but the effect is not statistically significant for the percentage changes of all homes sold. Second, when both uncertainty and local demand shocks are introduced, the effects of uncertainty on the housing market dominate that of local labor demand shocks on housing prices, median sell pric...
free text keywords: 330 Wirtschaft, ddc:330
Related Organizations
21 references, page 1 of 2

1. Aastveit, K. A., Natvik, G. J., & Sola, S. (2013). Economic uncertainty and the e ectiveness of monetary policy. Norges Bank mimeo. [OpenAIRE]

2. Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, forthcoming.

3. Bartik, T. (1991). Who bene ts from state and local economic development policies? Kalamazoo: W.E. Upjohn Institute for Employment Research. [OpenAIRE]

4. Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77 (3), 623-685.

5. Bloom, N., Bond, S. and Van Reenen, J. (2007). Review of Economic Studies, (74), 391-415.

6. Bloom, N. (2014). Fluctuations in uncertainty. Journal of Economic Perspectives, 28 (2), 153-76.

7. Bulan, L., Mayer, C. & Somerville, C. T. (2009). Irreversible investment, real options, and competition: evidence from real estate development. Journal of Urban Economics. 65, 237-251.

8. Charles, K., Hurst, E., & Notowidigdo, M. (2013). Manufacturing decline, housing booms, and non-employment. Chicago Booth mimeo. [OpenAIRE]

9. Christiano, L. J., Motto, R., & Rostagno, M. (2014). Risk shocks. American Economic Review, 104 (1), 27-65. [OpenAIRE]

10. Clapp, J. M., Eichholtz, P. & Lindenthal, T. (2013). Real option value over a housing market cycle. Regional Science and Urban Economics, 43 (6), 841-1040 [OpenAIRE]

11. Cunningham, C. R. (2006). House price uncertainty, timing of development, and vacant land prices: evidence for real options in Seattle. Journal of Urban Economics, 59 (1), 1-31.

12. Cunningham, C. R. (2007). Growth controls, real options, and land development. The Review of Economics and Statistics, 89 (2), 343-358.

13. Davis, M. A., & Quintin, E. (2014). Default when current house prices are uncertain. University of Wisconsin-Madison mimeo. [OpenAIRE]

14. Dorofeenko, V., Lee, G. S., & Salyer, K. D. (2014). Risk shocks and housing supply: A quantitative analysis. Journal of Economic Dynamics and Control , 45, 194-219.

15. Driscoll, J. C., & Kraay, A. C. (1998). Consistent covariance matrix estimation with spatially dependent panel data. Review of Economics and Statistics, 80 , 549-560. [OpenAIRE]

21 references, page 1 of 2
Any information missing or wrong?Report an Issue