Regional House Price Segmentation and Convergence in the US : A New Approach

This paper investigates the extent of regional integration (or, conversely, segmentation) in US home values. In contrast to some previous studies, we examine the degree of integration in the US with a data set which runs into 2012 and thus captures the latest period of bubble and bust, and employing a recently developed set of tools which yield estimates which are 1) time-varying, and 2) account for differences not just in correlation but also in amplitude between different housing markets. Our results indicate that contrary to some previous findings, overall integration in the US was falling, not rising over the early years of the bubble (2001-05). This lends some credence to the "lots of local bubbles" conjecture of Greenspan that the early stages of the bubble reflected froth in some individual markets, rather than a large underlying national bubble