The Time-Varying Correlation between Regional Home Prices and The Impact of Central Bank Balance Sheet Policies on Home Prices : A Graphical Descriptive Statistics Approach on The US Housing Market

Abstract: There has been a growing interest in economic policies and their impact within a country among the real estate economics research community in recent years. After the economic crisis of 2008, an unconventional monetary policy was created, and it has been called quantitative easing (QE), an instrument of economic policy applied through central banks to boost the economy in periods when conventional monetary policy is not satisfactory. As with the economic challenge brought by COVID-19, many central banks had to implement unconventional monetary plans. This thesis aims to discover the impact of quantitative easing (QE) and its opposite quantitative tapering (QT) on the housing prices of the US real estate market. In order to deal with this problem, this research performs time-varying rolling correlations, which are correlations between two-time series on a rolling window. The window for this research will be monthly and subject to historical data points from a 280-month period of the USA metropolitan price housing and the Federal Balance sheet between 1998 and 2022. The results show there is a positive correlation between the different US housing markets and the US Federal Balance Sheet in the majority of the US markets analyzed and finds a high positive correlation between the different regional house price indices and US National Home Price Index and finally the existence of spillover effect between the cities in the high tier (e.g., Los Angeles and Miami) and low-tier (e.g., Chicago and Atlanta) cities, such that rising trends in one city are mirrored by the following changes in the other city in the equivalent tier and vice versa.