What drives metropolitan house prices in California?

In a large-dimensional dynamic factor analysis
of Californian house prices, we decompose the metro-level house price
variation into aggregate structural shocks and regional structural shocks.
The regional (Californian) factors are separated from the US aggregate
factors by means of loading restrictions. In our structural analysis, we use
a combination of zero restrictions and sign restrictions and find that
regional shocks have a significant positive effects on the house prices in
the metropolitan areas of California while the aggregate counterparts were
often small but nevertheless non-negligible as seen in the historical
structural decomposition of the house prices series. In particular, we are
not able to document an important role for monetary policy shocks. On the other hand, credit shocks has played an important role in the historical decomposition of housing, employment, and loan quality in commercial banks in California.