This paper uses GARCH models and a panel VAR model to analyze possible time variation of the volatility of single-family home value appreciation and the interactions between the volatility and the economy, using a large quarterly data set that covers 277 MSAs in the U.S. from 1990:1 to 2002:2. We find evidence of time varying volatility in about 17% of the MSAs. Using volatility series estimated with GARCH models, we find that the volatility is Granger-caused by the home appreciation rate and GMP growth rate. On the other hand, the volatility Granger-causes the personal income growth rate but the impact is not economically significant.

Time-varying volatility in single-family home value appreciation occurs in 17% of U.S. metropolitan areas, mainly caused by home appreciation rate and GDP growth rate, with a small but significant impact on personal income growth rate.

Exploring Metropolitan Housing Price Volatility

Key Takeaway: Time-varying volatility in single-family home value appreciation occurs in 17% of U.S. metropolitan areas, mainly caused by home appreciation rate and GDP growth rate, with a small but significant impact on personal income growth rate.