House Price Responses to Monetary Policy Surprises: Evidence from the U.S. Listings Data
Denis Gorea, Oleksiy Kryvtsov and Marianna Kudlyak. First draft: February 2019.
Abstract: We present direct evidence of the immediate causal impact of interest rates on the U.S. housing market. Using detailed microdata on daily property listings and sales and on identified high-frequency monetary policy surprises, we find that list prices of newly listed properties respond within 2-3 weeks of a monetary policy surprise to medium- or long-term interest rates and the magnitude of the response is on par with stock price responses. Additional evidence shows that the mechanism behind the response operates through the housing financing channel. These findings suggest that the prompt responses of house prices to monetary policy surprises are more akin to the responses of prices of financial assets than of prices in markets hindered by significant adjustment frictions.
Paper in Working Paper series: FRBSF, Bank of Canada, Hoover Institution, IZA, SSRN, CEPR