Efficiency Of Housing Market In America

For the individual, house has two functions:living and investment. For the macro economy, the housing industry helps both economic development and livelihood security. Therefore, the health of the housing industry is very important. The rational housing prices is an important sign of the health of the housing market, that means that the housing market is efficient.The housing market of U.S. has experienced several stages with a long stable time, contributing to the rapid development of the economy. But there are also non rational period with cycle of great prosperity and depression, for example, since the year of 2000, which has seriously hurt the economy. Experience and lessons of the housing market in the USA will be helpful for the housing market in China. So, this paper studies the efficiency of USA housing market.The paper analyzes the price dynamics of housing market of 52 units (including 50 states and Washington D.C. Columbia, plus the whole USA), based on the methods from finance and compute their degrees of efficiency. The period of analysis is from the first quarter of 1975 to the first quarter of 2014, which covers the most volatile time of the housing market in the USA.In this paper, three different methods are used to analyze the efficiency. They are:the runs test, Hurst index and complexity-entropy causality plane, which are non parametric ways based on symbolic method.The results show that:1) the housing markets of all the units in the USA are not with weak form efficiency; 2) the degree of efficiency of different states are different, Mississippi is the highest with 0.89 (before the crisis it is 0.88); under the situation of full sample, Massachusetts and California are the lowest with 0.616; however, under the situation before 2007, Massachusetts is the lowest with 0.566; 3) the degree of complexity of different states are different, Mississippi is the lowest with 0.2014 (before the crisis it is 0.2164); under any situations, California are the highest with 0.352 in full period and 0.355 before 2007; 4) complexity and efficiency of American housing market showed a high negative correlation, with Spearman rank correlation coefficient-0.966; 5) the 2007 subprime crisis is a reasonable adjustment of the USA housing market, leading to the degree of efficiency of the market increased slightly, but it is limited; 6) if the Hurst index is accurate, the American housing market has a positive long run persistence, which indicates that the price of housing market of America has a long-term upward trend, though the 2007 subprime crisis is a rational reversion, it is limited; 7) the states with a high degree of efficiency are basically located on the East and west coasts, which are relatively developed, densely populated; while the states with a low degree of efficiency are located in the middle of the country, whose economy are at the low level. The author speculated that, the degree of efficiency of the market may be related to the degree of economic development, closely related and derived from the level of financial development.