House Price Moments in Boom-Bust Cycles

This paper describes six stylized patterns among housing markets in the United States that potential explanations of the housing boom and bust should seek to explain. First, individual housing markets in the U.S. experienced considerable heterogeneity in the amplitudes of their cycles. Second, the areas with the biggest boom-bust cycles in the 2000s also had the largest boom-busts in the 1980s and 1990s, with a few telling exceptions. Third, the timing of the cycles differed across housing markets. Fourth, the largest booms and busts, and their timing, seem to be clustered geographically. Fifth, the cross sectional variance of annual house price changes rises in booms and declines in busts. Finally, these stylized facts are robust to controlling for housing demand fundamentals – namely, rents, incomes, or employment – although changes in fundamentals are correlated with changes in prices. 1 The United States experienced a remarkable boom and bust in house prices in the 2000s. According to the Fiserv Case-Shiller 10-city index, house prices grew by 125 percent in real terms from their trough in 1996 to their peak in 2006 and subsequently fell by 38 percent over the nex