Macroeconomic Factors that Affect the Price of Housing in the United States: Evidence from a State-Level Panel Data Analysis

Abstract

Due to all the changes in the economy recently the goal of the study is to see how specific macroeconomic factors have affected the housing market in the past to gain some insight into where the overall housing market may trend in the future. This paper offers evidence from a state- level panel data analysis from 1975-2021 on the effects that macroeconomic factors have on home prices in the United States. This analysis focuses on state and country level variables to determine their effect on the housing price index. The results produced by this model indicate that increases in the unemployment rates, the annual supply of new homes, and the federal funds effective rate are connected to decreases in the housing price index. While increases in state minimum wages and inflation can be attributed to increases in home prices. All the variables in the model are statistically significant at the 1% level and the model has an R-squared of .89.