Is housing the business cycle? Evidence from US cities

Andra C. Ghent, Michael T. Owyang

Research output: Contribution to journalArticlepeer-review

69 Scopus citations


In a recent paper, Leamer (2007) identified housing as an important precursor of the national business cycle. Previous work, on the other hand, has shown that regional cycles may not be synchronous with the aggregate cycle. In this paper, we analyze the relationship between housing and the business cycle at the MSA-level for a set of 51 US cities. We find that declines in house prices are often not followed by declines in that city's employment. While the growth rates in housing variables appeared to slow ahead of city-level peaks, we find no consistent statistical relationship suggesting a city's permits or prices influences its business cycle. In fact, we find that national permits are a better leading indicator for a city's employment than a city's own permits. This suggest the possibility that housing is merely a proxy for other consumption or wealth indicators.

Original languageEnglish (US)
Pages (from-to)336-351
Number of pages16
JournalJournal of Urban Economics
Issue number3
StatePublished - May 2010


  • Leading indicator
  • Markov switching
  • Recession
  • Time varying transition probabilities

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies


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