Consumer Confidence and Monetary Policy: A US Housing Market Investigation

In researching an effect of consumer confidence on the housing price index a positive significant effect was found. Controlling for other monetary effects the only significant effect that was found was of the mortgage rate and it was negative, as predicted by theory. Researching whether these effects stay the same during the financial crisis by testing for a break in the data reveals that the only variable that is significant after the break is the consumer confidence. This means that it had a bigger and more apparent effect in the crisis time with evidence suggesting it might have been affecting the housing prices only in this period and not in previous quieter times. All monetary variables at the disposal of the FED do not seem to have a significant diminished effect during the crisis. In trying to determine where the break in the data exactly occurred, evidence suggests that it happened deeper into the crisis, midway through 2008