The nonlinear effect of macroeconomic and financial uncertainty on regional housing prices in the USA

This study investigated the nonlinear effects of macroeconomic and financial uncertainty on regional housing prices in the USA. The sample data contain 50 largest metropolitan areas in the USA, and panel threshold regression was employed to test the nonlinear effects of macroeconomic and financial uncertainty. Regardless of using macroeconomic uncertainty or financial uncertainty as the threshold variable, the results of panel threshold regression confirm a nonlinear effect exists. Rising macroeconomic uncertainty, whether in the low or high regime, will reduce housing prices in most of the USA, but if macroeconomic risk reaches the high regime, the effect of macroeconomic uncertainty will be insignificant. Contrastingly, financial risk can have a positive effect on housing prices in the low and middle regimes of financial uncertainty, but this effect becomes negative in the high regime of financial uncertainty. These findings confirm that the responses of regional housing prices will differ if the macroeconomic and financial risk level is high.