Macroeconomic Shocks and Housing Prices: Intra-Urban Submarket Asymmetries

Drawing on debates about how the macroeconomy influences real estate markets and its cycles, we investigate whether the price dynamics of housing submarkets respond heterogeneously to macroeconomic shocks. Using 277k+ apartment transactions from Belo Horizonte (Brazil) for 2007–2023, we estimate a hedonic price model to predict values and delineate ten spatially contiguous housing submarkets via the SKATER regionalization algorithm. We then build monthly price indices for each submarket and, for tractability, focus our Local Projections impulse-response analysis on two contrasting areas: a centrally located high-end submarket and a low-end multiregional periphery. The macro set includes policy rate, mortgage credit, exchange rate, consumer and general inflation, construction standard class, regional activity, and economic confidence indicators. Results show clear macro-spatial asymmetries: in the high-end core, prices react significantly and negatively to monetary tightening and general inflation, whereas in the periphery, mortgage financing level exerts the strongest positive effect, with construction costs (low standard) and consumer confidence also mattering. We conclude that macroeconomic shocks transmit unevenly within cities, implying that housing-finance design and price-stability monitoring should be spatially sensitive, targeting credit access and cost pressures where they have the most significant impact.