Figure 1: Estimated average and cross-sectional dispersion of expected
capital gains, with 95% confidence bands, for repeat sales of
single-family homes in Cleveland, OH; Phoenix, AZ; and San Diego, CA
from the equations (1) and (2), \(\log p^{i,j}_{t+1}-\log
p^{i,j}_{t}=a^j_{t+1,t}+b^j_{t+1,t}\log
p^{i,j}_{t}+\epsilon^{i,j}_{t+1,t}\) and \(log p^{i,j}_{t+k}=a^{i,j}_{t+k,t+k-1} +
\sum_{m=t+2}^{t+k}\prod_{\ell=m}^{t+k}
(1+b^{j}_{\ell,\ell-1})a^{j}_{m-1,m-2}
+\prod_{\ell=t+1}^{t+k}(1+b_{\ell,\ell-1})\log p_t^{i,j}\),
respectively, where \(t=1998,...,2007\)
and \(k\in[1,2008-t]\). The data
consist of 48,968 repeat sales in Cleveland, OH; 148,842 repeat sales
in Phoenix, AZ; and 84,076 repeat sales in San Diego, CA via ZTRAX Zillow, 2026.
(a) Cross-sectional Dispersion of Expected Capital Gains (b̂t + 1, tj),
Percentage Points
(b) Average Expected Capital Gains (ât + 1, tj),
Percentage Points
Panel 1a The panel shows the cross-sectional dispersion of expected capital gains from 1999 to 2007 for Cleveland, OH; Phoenix, AZ; and San Diego, CA. All estimates are between -0.1 and about 0.01 from 1999 to 2004, which indicates that relatively less expensive houses had relatively higher expected capital gains. The estimates for Phoenix, AZ drops below -0.1 in 2005 and then climbs to 0.2 by 2007. The estimates for Cleveland, OH and San Diego, CA are around 0 in 2005 and then climb to 0.08 and 0.2, respectively. Panel 1b The panel show average expected capital gains from 1999 to 2007 for Cleveland, OH; Phoenix, AZ; and San Diego, CA. All estimates range from about 0 to 2 from 1999 to 2005 indicating growing house prices, on average. Thereafter, the estimates fall to around -3 for Phoenix and San Diego, but only about -1 for Cleveland.
Figure 2: 12-month percentage change in house prices for select
metropolitan statistical areas, percentage points. Dark shaded bands are
NBER recessions and the light shaded banded between the two vertical
lines is the U.S. housing boom period defined as 1998 to 2006 in this
paper. Source: S&P Cotality Case-Shiller Home Price Indices,
National Bureau of Economic Research.
The figure plots 12-month percentage change in house prices for select metropolitan statistical areas of Cleveland, OH; Phoenix, AZ; and San Diego, CA. The x-axis ranges from 1987 to 2017 and the y-axis from -40 to 60 percent. In 1997, house price growth for San Diego, CA rose above 10 percent, stayed there until about 2003 when it rose even further to a peak of 30 percent before dropping to -25 percent by 2008. Thereafter, house price growth fluctuated between -10 and 20 percent. House price growth for Cleveland, OH stayed below 10 percent until about 2006, where it turned negative and reached a nadir of -10 percent by about 2008. Thereafter, it fluctuated around -5 percent to 10 percent. House price growth for Phoenix, AZ also hovered around 5 percent until 2003, when it boomed to 50 percent by about 2006. It then dropped to about -40 percent by 2008 and fluctuated between -10 and 25 percent thereafter.