Global house prices move together because of how banks borrow US dollars

House prices in different countries tend to rise and fall at the same time. It turns out that non-US banks borrowing US dollars for mortgages are a big reason why this happens.

Everyone assumed that when house prices moved together across countries, it was because of shared economic trends or big global banks lending everywhere. This paper shows that it's actually about how individual non-US banks get their hands on US dollars. If a country's banks rely heavily on US dollar funding, their local housing market becomes more sensitive to changes in the dollar's value.