Monetary Policy and Housing Overvaluation

Volume/Issue: Volume 2025 Issue 207

Publication date: October 2025

ISBN: 9798229027779

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats


English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Money and Monetary Policy , Demography , Monetary Policy , Overvalued Housing Markets , House Price Expectations , Loans , Housing prices , Central bank policy rate , Asset bubbles , Housing , Reserve requirements , Mortgages

Also of interest

Private Participation and its Discontents: Insights from Large-Scale Surveys

Public Investment Management Bottlenecks in Low-income Countries

Central Bank Digital Currencies and Financial Stability: Balance Sheet Analys...

Demand for Ethanol Considering Spatially Differentiated Fuel Retailers

Summary

This paper examines how housing market overvaluation—measured by the price-to-rent ratio and its deviations from long-term trends—affects the transmission of monetary policy. Using U.S. metropolitan-level data and three measures of monetary policy shocks, we find that house prices respond more strongly to policy rate changes in overvalued markets. Examining buyer heterogeneity, we show that investor demand, proxied by non-owner-occupied purchases, declines more sharply after monetary tightening in these markets. These results are consistent with models of extrapolative beliefs and suggest that monetary policy can serve a stabilizing role during housing booms.