Investigating regional house price convergence in the United States: Evidence from a pair-wise approach

In this paper we examine long-run house price convergence across US states using a novel econometric approach advocated by Pesaran (2007) and Pesaran et al. (2009). Our empirical modelling strategy employs a probabilistic test statistic for convergence based on the percentage of unit root rejections among all state house price differentials. Using a sieve bootstrap procedure, we construct confidence intervals and find evidence in favour of convergence. We also conclude that speed of adjustment towards long-run equilibrium is inversely related to distance.

► House price convergence is investigated for US states and Metropolitan Areas. ► A probabilistic test statistic is based on pair-wise unit root tests. ► Confidence intervals are obtained from a bootstrap procedure. ► The results confirm the presence of long-run convergence. ► The speed of adjustment is inversely related to the distance between states.