On the Effects of Consumer Sentiment on House Permits: Asymmetric Evidence From State-Level Data in the United States

Previous studies analyzing the link between the housing market and consumer sentiment focus on the impact of the sentiment on house prices. This paper assesses the impact of consumer sentiment on house permits as a proxy for housing production using a linear model that assumes symmetric effects. Additionally, we consider a nonlinear asymmetric model. We estimate both models using state-level data from each state of the United States and find short-run effects of consumer sentiment on house permits in 31 and long-run effects in 33 states. The comparable numbers by estimating a nonlinear asymmetric model were 42 and 41, respectively. In sum, increased consumer confidence has positive long-run effects on the issuance of house permits in most states.