This study aims to examine housing market dynamics in Shelby County, Tennessee, during the COVID-19 period (2020–2022) to determine whether house price growth reflected speculative behavior or fundamental economic drivers.
Using granular multiple listing service transaction data merged with macroeconomic indicators, including mortgage rates, inflation, unemployment and construction costs, the study uses fixed-effects regression models, propensity score weighting and nonlinear specifications to assess the relative importance of demand fundamentals, supply constraints and speculative activity. Market liquidity measures, including sales turnover and months’ supply, are incorporated to complement price-based analysis.
House price appreciation during the pandemic was primarily driven by fundamental demand factors, particularly historically low mortgage rates, increased household liquidity and shifting housing preferences. Speculative activity, measured by non-owner-occupied and out-of-town purchases, played a limited role and did not amplify price growth. Liquidity indicators further show that price increases were closely associated with demand pressure rather than speculative excess.
The analysis focuses on a single regional housing market, which may limit generalizability. However, the findings highlight the importance of regional heterogeneity in housing responses to macroeconomic shocks.
Policymakers should account for local market fundamentals when designing housing and credit policies rather than relying solely on national narratives of speculative bubbles.
This study contributes to the housing finance literature by integrating market liquidity measures with speculation indicators in a regional setting, demonstrating that speculative behavior does not uniformly influence housing markets across locations during periods of economic disruption.
