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Forecasting Prices and Excess Returns in the Housing Market
Author(s) -
Case Karl E.,
Shiller Robert J.
Publication year - 1990
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00521
Subject(s) - economics , microdata (statistics) , excess return , investment (military) , econometrics , atlanta , population , monetary economics , metropolitan area , medicine , paleontology , context (archaeology) , demography , pathology , sociology , politics , political science , law , census , biology
The paper uses quarterly indexes of existing single‐family home prices estimated with microdata on properties that sold more than once to estimate excess returns to investment in owner‐occupied housing. Housing prices and excess returns are estimated over the period 1970:1 to 1986:3 for Atlanta, Chicago, Dallas, San Francisco. Using time‐series cross‐section regressions we test for the forecastability of prices and excess returns using a number of independent variables. Price changes in one year tend to continue for more than one year in the same direction. The ratio of construction costs to price, changes in adult population and increases in real per capita income all are positively related to excess returns or price changes over the subsequent year. The results add weight to the argument that the market for single‐family homes is inefficient.