Articles
News and Sentiment Shocks in Housing Markets
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AuthorInhwan So (Hongik University)
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Year2026
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VolumeVol.19
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NumberNo.1
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This paper investigates the effect of changes in market participants' confidence on main variables of housing market in Korea. Confidence changes are decomposed into two orthogonal shocks: news shocks and sentiment shocks. With monthly data from July 2011 to July 2025, we construct a structural VAR model, identifying the shocks through medium-run restrictions. The empirical results show that news shocks have significant and persistent positive impacts on housing construction and transactions, but transitory or negative effects on housing prices. Sentiment shocks have largely short-lived effects on housing construction and transactions, but exert strongly positive and persistent effects on housing prices. The results from forecast error variance decomposition further confirm that housing price fluctuations are primarily explained by sentiment shocks. These findings suggest that housing prices are driven more by market participants' psychological factors than by fundamental information factors. -
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