Time-varying connectedness of metropolitan housing markets

We construct a time-varying measure of connectedness for 382 U.S. metropolitan housing markets using monthly house price data from 1975 to the present. Housing connectedness in the long run is found to be much stronger than the instantaneous connectedness, both of which exhibit notable variation over time and across metropolitan areas. Unlike stock market connectedness, housing market connectedness leads the business cycle; it helps predict the likelihood of future recessions.