The Research On The Fluctuation Of China's Real Estate Price With Regime Switching Feature

China's real estate market has been developed rapidly since the reform of the Housing system in 1998. The real estate industry has the characteristic of long chain, great correlation degree and so on, so that changes in the real estate industry have significant impacts on the national economic. Just as the national economic has cycle, the volatility of the real estate industry is not stable and unchanging. At different regimes, the relationships among real estate and macroeconomic variables can not be described as the linear relationship which consistent at all times. The house prices which fluctuations not only affect the macro-economic development, but also affect the level of ordinary people's wealth and welfare changes is a importance measure of balanced development of the real estate indicators. Therefore, studying nonlinear relationship between the prices and other macroeconomic variables has important theoretical and practical significance.Many domestic scholars focused more on the linear relationship between price and other macroeconomic variables, and ignored of existing the nonlinear characteristics of different time interval. In this paper, we divide the price volatility of the real estate into three-district system regimes,which named "recession", "moderate growth phase" and "fast growth stage", and thus establish the Markov regime switching error correction model (MSIAH (3)-VECM (2)) to analyze the real estate price fluctuations from January 1998 to February 2010.Finally we use the cointegration and error correction model to analyze the relevance of house prices and other macroeconomic variables under the different regimes and draw the following conclusions:1. China's real estate price fluctuations exists 3 significant regimes, which named "recession", "moderate growth phase" and "rapid growth phase". And we find that there was 8 times transfer phenomenon in China's real estate market. From the transition probability, we can find that the real estate price fluctuations in the "moderate growth phase," has the highest probability of self-sustained and the maximum frequency in this stage, and in the "rapid growth phase," has the lowest probability of self-sustainability.2. Under different regimes, the correlation coefficient between the house prices and other economic variables are difference.3. Whatever during the long term or the short term, the pre-price volatility is the main factor driving changes in house prices, which is mainly due to the volatility of prices of the self-sustaining and consumer expectations. However, in the short term, macroeconomic variables in different regimes differently impact on price fluctuations. During the regime 1, the changing of money supply is the main reason for short-term fluctuations, which partly explains that the Chinese real estate prices have dropped significantly after the experience crisis of the United States. And in order to ensure stable running of the economy, the government implemented a loose monetary policy, which making house price has been rapidly rebound after entering into recession. During the regime 3, the economic conditions in the short term regime has a negative effect on the price changes indicating that the rapid growth of the house prices will stimulate the real estate investment too quickly, making the real estate industry growing too fast which leads to the corresponding industry reduce investment and leads to industrial imbalances, making the economic situation has a negative response on house price.