House Prices Respond Promptly to Monetary Policy Surprises

Gorea, Denis; Kmetz, Augustus; Kryvtsov, Oleksiy; Kudlyak, Marianna; Ochse, Mitchell

Journal Article

House Prices Respond Promptly to Monetary Policy Surprises

Abstract: New evidence based on listings of homes for sale from 2000 to 2019 suggests house prices adjust to monetary policy changes over weeks rather than years, faster than previously thought. Housing list prices fall within two weeks after the Federal Reserve announces an unexpected policy tightening, similar to responses of other financial assets. House prices respond more strongly to unexpected changes in long-term interest rates than to surprises in the short-term federal funds rate. Changes in mortgage rates following Fed announcements are key to explaining this rapid house price reaction.

Keywords: monetary policy; house prices; mortgages;