The Business Cycles of Urban Housing Market (Case Study: Urban Housing Market of Isfahan, 1980-2014)

Author

Faculty of Research Excellence in Art and Entrepreneurship, Art University of Isfahan, Isfahan, Iran

Abstract

H





ousing is a commodity with unique features and its market, especially in urban areas, is characterized by unique business cycles that differentiate it from other commodities. On one hand, housing market can be deeply influenced by economic shocks, and on the other hand, the sheer size of housing investments makes the economy particularly vulnerable to any shock in this market. Hence, analysis of housing markets and their boom and recession periods is of interest to the actors of housing sector as well as economists. This study aimed to investigate the business cycles of urban housing market of Isfahan province (Iran) over the period of 1980-2014, and analyze the trends of private investment in this market by the use of Markov Switching Vector Auto Regression (MS-VAR) model, which has shown great strength in differentiating boom and recession periods. The results show that the periods of boom and recession in Isfahan’s urban housing market both have an expected length of 10 years, and that the business cycles of this housing market run opposite to the business cycle of the national economy.
 

Keywords

References

Akbari, N., Emadzadeh, M., & Razavi, S. A. (2004). Factors Affecting the Price of Housing in Mashhad. Quarterly Journal of Economic Researches, 4(11 & 12), 57-78.
Akbari, N., & Tavasoli, N. (2008). Analysis of the Effects of Municipal Taxes on House Prices: A Case Study of Isfahan City (Spatial Econometric Approach). Economic Reviews, 1, 47-64.
Alberts, W. (1962). Business Cycles, Residential Consumption Cycle, and the Mortgage Market. The Journal of Political Economy, 70(3), 263-281.
Bastani, A., & Rezaei, J. (2008). Analysis of Housing Market. Journal of Commercial Reviews, 30, 62-70.
Clements, M. P., & Krolzig, H. (2001). Can Regime-switching Models Reproduce the Business Cycle Features of US Aggregate Consumption, Investment and Output? Econometrics Journal, 1, C47- C75.
Davis, M. A., & Heathcote, J. (2005). Housing and the Business Cycle. International Economics Review, 46(3), 751-784.
De Leeuw, F., & Gramlich, M. (1969). The Channels of Monetary Policy: A Further Report on Federal Reserve- M.I.T. Model. The Journal of Finance, 24(2), 265-290.
Earley, F. (1996). Leap-frogging in the UK Housing Market. Housing Finance, 32, 7-15.
Fair, R. C. (1972). Disequilibrium in Housing Models. The Journal of Finance, 27(2), 207-221.
Farzinvash, A., & Mohseni Zanori, J. (2009). The Role of Assets in Monetary Transmission Mechanism. Nameh Eghtesad Mofid, 72(5), 3-32.
Ghaderi, J., Slamluyan, K., & Oji Mehr, S. (2011). Factors Affecting Housing Investment in Iran. Quarterly Journal of Economic Research, 11(3), 47-70.
Gholizadeh, A. A., & Kamiab, B. (2008). Effect of Monetary Policy on House Price Bubbles in Boom and Recession Periods in Iran. Quarterly Journal of Quantitative Economics, 5(3), 47-77.
Heydari, A. (2017). Perspective of Investment in the Housing Sector/Will Housing Investments be Profitable as they used to be? Ayande Roshan Monthly Journal, 6-7, 30-40.
Jafari Samimi, A., & Alami, Z., & Hadizadeh, A. (2007). Factors Affecting the Determination of House Price Index in Iran. Iranian Economic Research, 32, 31-53.
Khalili Iraqi, S. M., & Ahmad, H. (2011). A Review of Housing Economy. Tehran: Tehran University.
Khiabani, N. (2003). Determinants of House Prices in Iran, Office of Housing Planning and Economics. Quarterly Journal of Housing Economics, 34, 46-52.
Leamer, E. (2007). Housing is the Business Cycle. Proceedings - Economic Policy Symposium, Retrieved from
http://www.nber.org/papers/w13428.
Geipele, I., & Kauškale, L. (2013). The Influence of Real Estate Market Cycle on the Development in Latvia. Procedia Engineering, 57, 327-333.
Hamilton, J. D. (1989). A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle. Econometrica, 57, 357-84.
Hamilton, J. D., & Jorda, O. (1994). A Time Series Analysis. New Jersey: Princeton University Press.
Janczura, J., & Weron, R. (2010). Efficient Estimation of Markov Regime-switching Models: An Application to Electricity Wholesale Market Prices. MPRA Paper, Retrieved from
https://link.springer.com/content/pdf/10.1007/s10182-011-0181-2.pdf.
Jin, Y., & Zeng, Z. (2004). Residential Investment and House Prices in a Multi-sector Monetary Business Cycle Model. Journal of Housing Economics, 13, 268-286.
Krystalogianni, A., Matysiak, G., & Tsolacos, S. (2004) Forecasting UK Commercial Real Estate Cycle Phases with Leading Indicators: a Probit Approach. Journal Applied Economics, 36(20), 2347-2356.
Kydland, F. E., & Prescott, E. C. (1982). Time to Build and Aggregate Fluctuations. Econometrica, 50(6), 1345-1370.
Lamont, O., & Stein, J. C. (1999). Leverage and House-Price Dynamics in U.S. Cities. Journal of Economics, 30, 498-514.
Lucas, R. (1990). Liquidity and Interest Rates. Journal of Economic Theory, 50, 237-264.
Maisel, S. J. (1967). The Effects of Monetary Policy on Expenditures in Specific Sectors of the Economy. The Journal of Political Economy, 76(4), 796-814.
Mayer, C. J. (1993). Taxes, Income Distribution, and the Real Estate Cycle: Why All Houses Do Not Appreciate at the Same Rate. New England Economic Review, May/June, 39-50.
Miles, D., & Andrew, S. (1997). The Merrill Lynch Model of the UK Housing Market. London: Merrill Lynch.
Monnet, E., & Wolf, C. (2017). Demographic Cycles, Migration and Housing Investment. Journal of Housing Economics, 38(4), 38-49.
 
Mussa, A., Waoma, G., & Nwaogu, S. (2017). Immigration and Housing: A Spatial Econometric Analysis. Journal of Housing Economics, 35(1), 13-25.
Najafi, B. (2004). Contribution of Factors Affecting the Housing Supply in Urban Areas of Iran; with an Emphasis on Land Prices (Master's thesis, University of Tehran, Tehran). Retrieved from https://www.proquest.com/libraries/academic/dissertations-theses/.
Ortalo-Magne, F., & Rady, S. (2004). Housing Transactions and Macroeconomic Fluctuations: A Case Study of England and Wales. Journal of Housing Economics, 13, 288-304.
Ortalo-Magne, F., & Rady, S. (2006). Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints. Review of Economic Studies, 73, 459-485.
Osland, L., & Thorsen, I.  (2013). Spatial Impacts, Local Labor Market Characteristics and Housing Prices. Urban Studies, 50(10), 2063-2083.
Poterba, J. N. (1991). House Price Dynamics: The Role of Tax Policy and Demography. Brookings Papers on Economic Activity, 2, 143-203.
Seyednoorani, S. M. R. (2013). Estimation of Factors Affecting Iran's Housing Supply: Application of Single-Center Growth Model with GMM Approach. Quarterly Journal of Economic Research, 13(3), 1611-175.
Smith, B. A., & Tesarek, W. P. (1991). House Prices and Regional Real Estate Cycles: Market Adjustments in Houston. Areuea Journal, 19, 396-416.
Sutton, G. D. (2002). Explaining Changes in House Prices. BIS Quarterly Review, 32, 46-60.
 
Vargas, G. A. (2009). Markov Switching VAR Model of Speculative Pressure: An Application to the Asian Financial Crisis. Retrieved from http://ink.library.smu.edu.sg/etd_coll/27.
Witkiewicz, W. (2002). The Use of the HP-filter in Constructing Real Estate Cycle Indicators. Journal of Real Estate Research, 23(1-2), 65-88.
Iranian Economic Review
Volume 23, Issue 1
January 2019
Pages 109-128

Files

Share

How to cite

Statistics