Working Paper: CEPR ID: DP17595
Authors: Denis Gorea; Oleksiy Kryvtsov; Marianna Kudlyak
Abstract: Existing literature documents that house prices respond to monetary policy surprises with a significant delay, taking years to reach their peak response. We present new evidence of a much faster response. We exploit information contained in listings for the residential properties for sale in the United States between 2001 and 2019 from the CoreLogic Multiple Listing Service Dataset. Using high-frequency measures of monetary policy shocks, we document that a one-standard-deviation contractionary monetary policy surprise lowers housing list prices by 0.2-0.3 percent within two weeks—a magnitude on par with the effect on stock prices. House prices respond stronger to the surprises to future rates as compared to the surprise changes in the federal funds rate. Sale prices are mostly pre-determined by list prices and do not independently respond to monetary policy surprises.
Keywords: house prices; monetary policy; transmission of monetary policy; list and sales prices
JEL Codes: E52; R21; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary policy surprises (E39) | house prices (R31) |
| one-standard deviation contractionary monetary policy surprise (E39) | housing list prices (R31) |
| monetary policy surprises regarding future interest rates (E43) | house prices (R31) |
| list prices (P22) | sale prices (P22) |
| monetary shocks (E39) | list prices (P22) |