The Impact of Government Policies on the Housing Market

In this study, we dive into how government policies impact the housing market. Specifically, we examine how the three government policies of M2 supply, federal fund rate, and government expenditures shift home prices. This analysis consists of several multi-regression models that we execute to help explain the importance of government intervention in the housing market for buyers and investors using data from 1987 to 2021. Our results demonstrate that the federal fund rate has a negative relationship with home prices. On the other hand, both M2 supply and government expenditures have a positive impact on home prices. Comparing all three government policies, M2 supply has the most dominant impact on home prices at the one percent significance level. This study is meaningful because it provides readers with insight into how these three specific government policies affect the affordability of home prices. Moreover, the regression results of the econometric models could be used by the Federal government and Federal Reserve to help adjust their policies for the benefit of the lower-income individuals, especially during times of economic crisis.