Determinants of Real Estate Prices in the United States

• Název práce v češtině: Determinanty cen nemovitostí ve Spojených Státech
• Název v anglickém jazyce: Determinants of Real Estate Prices in the United States
• Klíčová slova: Nemovitostní trh, hodnoty domů, kointegrace, panelová regrese
• Klíčová slova anglicky: Housing market, home values, cointegration, panel regression
• Akademický rok vypsání: 2020/2021
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: Mgr. Roman Kalabiška
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 18.05.2021
• Datum zadání: 24.05.2021
• Datum a čas obhajoby: 07.09.2022 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O314, Opletalova - místn. č. 314
• Datum odevzdání elektronické podoby: 02.08.2022
• Datum proběhlé obhajoby: 07.09.2022
• Oponenti: PhDr. Michal Hlaváček, Ph.D.

Seznam odborné literatury

U.S. Census Bureau and U.S. Department of Housing and Urban Development, Average Sales Price of Houses Sold for the United States [ASPUS], retrieved from FRED, Federal Reserve Bank of St. Louis; <https://fred.stlouisfed.org/series/ASPUS>, 2021.

United States housing prices & market - REDFIN. (2020). Retrieved May 10, 2021, from <https://www.redfin.com/us-housing-market>.

Cohen, V. & Karpavičiūtė, L. (2017): “The analysis of the determinants of housing prices”. Independent Journal of Management & Production, 8(1), 49-63.

Kalabiška R. & Hlaváček M. (2020): ”Regional Determinants of Housing Prices in the Czech Republic”, IES Working Papers 9/2020. IES FSV. Charles University.

Folger, J. (2020): ”The Truth About Real Estate Prices.” Retrieved 2021, from <https://www.investopedia.com/articles/mortages-real-estate/11/the-truth-about-the-real-estate-market.asp>.

Hlaváček, M. & Komárek, L. (2009): “Housing Price Bubbles and their Determinants in the Czech Republic and its Regions”, ČNB Working Papers, vol. 12/2009.

Belke, A. & Keil, J. (2017): ”Fundamental determinants of real estate prices: A panel study of German regions”, Ruhr Economic Papers, No. 731, ISBN 978-3-86788-851-6, RWI - Leibniz-Institut für Wirtschaftsforschung, Essen.

Gros, D. (2007): "Bubbles in Real Estate? A Longer-Term Comparative Analysis of Housing Prices in Europe and the US", CEPS Working Document, No. 276, Centre for European Policy Studies, Brussels. Available at https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1337979_code1194431.pdf

Halcomb, D.R., & Hussain, S.S.S. (2002): "Asset Price Bubbles: Implications for Monetary, Regulatory and International Policies". Chicago Fed Letter, n.181b (Special Issue).

Schnure, C. (2005): "Boom-Bust Cycles in Housing: The Changing Role of Financial Structure". IMF Working Papers 05 (200).

Capozza, D.R. & Hendershott, P.H. and Mack, C. and Mayer, C.J.: "Determinants of Real House Price Dynamics" (October 2002). NBER Working Paper No. w9262.

Předběžná náplň práce v anglickém jazyce

Research question and motivation:
The main research question I intend to study is: What are the main determinants of real estate prices in the United States?

Real estate is considered to be a safe investment, but investors or future homeowners have to be careful of recession or any other disasters. Looking at historical average prices of homes sold in the US, one can see that from the year 1963 to 2007 the prices climbed fairly steadily until the housing bubble burst and the financial crisis of 2008 (FRED 2021). After that it took around 6 years to get to the same price level as before the crisis. But the fluctuation does not look the same in every region, state, or city. The price is heavily affected by the location of the real estate. Demand for real estate is heavily determined by disposable income of household and by labor market factors including unemployment rate and economic activity of the population. Last but not least some demographic factors should be considered, migration, natural population growth and marriage/divorce rates. Supply factors as building construction costs, building plot prices and number of existing houses have also apparent effect on real estate prices (Hlaváček & Komárek, 2009). In the US there is currently a lot smaller supply of homes than demand. 42% of homes sold last year were sold above list price because of it (REDFIN 2020). This entails that almost half of the homes received multiple offers, which indicates bidding wars and a competitive housing market. The housing market and financial sector are closely connected as houses can be purchased by mortgage loans or funds of the investor/future homeowner. That is why mortgage rates will be considered in the research as well.


Contribution:
In my thesis I will use time series data analysis to investigate the effect of each variable in regression for the whole US and then I will execute a panel data analysis to test the determinants. Panel data analysis will allow me to compare different states and regions. This work aims to compare the effect of different variables on the prices of single-family homes and see whether similar or different results occur to previous research.


Methodology:
In my thesis, I will be using data from publicly available databases. For the whole US, I will be using time-series data analysis. Before the regression, data need to be checked for stationarity using the Augmented Dickey-Fuller test. If data are not found stationary the data will be transformed accordingly. To check whether the assumptions are met we use a series of tests. The Breusch-Godfrey test for testing autocorrelation of disturbances, the White´s test or Breusch-Pagan test for testing heteroscedasticity, and testing for multicollinearity with Variance Inflation Factors. To investigate causality between different variables Granger causality test will be also used (Cohen & Karpavičiūtė, (2017). For the regional analysis, I will use panel data analysis. I expect to use fixed effects transformation, in order to avoid endogeneity issues and as it is expected that autocorrelation will occur.


Outline:
1. Abstract
2. Introduction
3. Determinants of real estate market in US
a. Supply and demand
4. Literature review
5. Methodology
a. Data description
b. Testing stationarity and assumptions
c. Data analysis
6. Results
7. Conclusion