Asymmetric Volatility Transmission between Home Foreclosures, Housing Prices, Unemployment Rate and Adjustable Mortgage Rates

This paper uses the EGARCH model to investigate the volatility spillovers between home foreclosures, adjustable mortgage rates, housing prices and unemployment rate for the US. The results provide evidence of volatility spillover effects from adjustable mortgage rates, home foreclosures and unemployment rate to housing prices. The results further indicate the presence of volatility spillover effects from housing prices to home foreclosures. However, unemployment rate is affected only by volatility spillover from adjustable mortgage rates. These results imply that to mitigate the problem of volatility in housing market, the policy maker should coordinate adjustable mortgage rates, housing prices and home foreclosures. In other words, the authorities cannot effectively use foreclosure strategies to influence the housing market without considering adjustable mortgage rates, housing prices and unemployment rate.