Paper Title
THE EFFECTS OF BUSINESS AND FINANCIAL CONDITIONS ON HERDING BEHAVIOR AND BUBBLES IN U.S. HOUSING MARKETS

Abstract
This study investigates herding behavior in U.S. housing market from 1975 to 2023. The results show that degree of herding behavior does vary across regions and regimes. Herding behavior seems to be strong and consistent across regimes of extreme market turbulence, bull and bear markets, and weak economy in most of the regions. A period of bear housing markets and tightened financial condition exhibit stronger effects on housing return dispersion in almost all regions. Only housing markets in the Mountain, Mid Atlantic, South Atlantic, and New England do herd during the period of high equity market volatility. Herding behavior does not occur during the regimes of high transaction volume and high uncertainty in economic policy, suggesting that economic agents tend to make rational decisions during such periods. Herding in U.S. housing market appears with greater intensity two years after the 2002 technology bubble crisis and 2008 mortgage crisis. There is ample evidence that herding behavior in the region does cause the future formation of housing bubbles in the region and nation-wide and destabilizes the overall U.S. housing and stock markets. JEL Classification: G 14 and G 15 Keywords - Herding Behavior, Business Conditions, Financial Conditions, Bubbles, and Housing Markets