| ABSTRCT | This article aims to explore the implications of the recent housing crisis from
a forward-looking perspective in the form of the two-regime switching
phenomena under a Threshold Autoregressive (TAR) model. Three
categories of thresholds, which are housing prices, housing volumes and
price-to-income ratios, are adopted in an attempt to examine the US statelevel
housing market cycles in multiple dimensions. In general, while lagged
differenced thresholds fail to capture the recent housing boom-and-bust
regime switching, moving-average thresholds succeed in signalling a housing
crisis in many states. The regime-switching autoregressive structures show
that housing price cycle has remarkable series dependence, and the housing
volume cycle tends to show a mean-reversion pattern. Most importantly,
only four states, Arizona, California, Florida and Nevada, display the bust
regime of housing price growth during 2006 to 2010. The price-over-income
also indicates that less than five states have significant two switching
regimes. Otherwise, most states exhibit low-growth regime of housing
permits, implying a nationwide housing volume cycle during the current
housing crisis. The forecasting system provides a helpful guideline for
policy-making of the government as well as household decisions of
consumption and investment. |