House price convergence: Evidence from US state and metropolitan area panels |
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| Authors: | Young Se Kim Jeffrey J Rous |
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| Institution: | 1. Department of Economics, Sungkyunkwan University, 53 Myeongnyun-dong 3-ga, Jongno-gu, Seoul 110-745, Republic of Korea;2. Department of Economics, University of North Texas, 1155 Union Circle, Denton, TX 76203, USA;1. Regional Research Institute, 886 Chestnut Ridge Road, Room 511, PO Box 6825, West Virginia University, Morgantown, WV 26506-6825, United States;2. Economics Department, 5 Liberty Street, Beatty Center Suite 413, College of Charleston, Charleston, SC 29424, United States;3. Division of Resource Management, 2042 Agricultural Sciences Building, PO Box 6108, West Virginia University, Morgantown, WV 26506-6108, United States;1. Departamento de Economía. Universidad Jaume I, Spain;2. Departamento de Economía Aplicada II. Universidad de Valencia, Spain;1. Department of Liberal Arts, Indian Institute of Technology, Hyderabad, India |
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| Abstract: | We study house price convergence in panels of US states and metropolitan areas. Our analysis is centered on three issues. First, we test whether the US house prices are converging over time using log t convergence test by Phillips and Sul (2007). The test results suggest that there is little evidence of overall convergence. The second issue is to investigate the possibility of a convergence club where the cross-sectional dispersion of house prices of the club members decreases over time. We utilize a clustering algorithm and the results support that there is strong evidence of multiple convergence clubs. Finally, we examine the general characteristics of the various convergence and divergence subgroups as well as some important driving forces of convergence clubs. We find that housing supply regulation together with climate are important determinants of convergence club membership. |
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