Forecasting Real Estate Prices

Handbook of Economic Forecasting: Vol II, G. Elliott and A. Timmermann, eds., Elsevier, 2012

91 Pages Posted: 21 Apr 2013

See all articles by Eric Ghysels

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Alberto Plazzi

Swiss Finance Institute; USI Lugano

Walter N. Torous

Massachusetts Institute of Technology

Rossen I. Valkanov

University of California, San Diego (UCSD) - Rady School of Management

Date Written: June 30, 2012

Abstract

This chapter reviews the evidence of predictability in US residential and commercial real estate markets. First, we highlight the main methodologies used in the construction of real estate indices, their underlying assumptions and their impact on the stochastic properties of the resultant series. We then survey the key empirical findings in the academic literature, including short-run persistence and long-run reversals in the log changes of real estate prices. Next, we summarize the ability of local as well as aggregate variables to forecast real estate returns. We illustrate a number of these results by relying on six aggregate indexes of the prices of unsecuritized (residential and commercial) real estate and REITs. The effect of leverage and monetary policy is also discussed.

Keywords: real estate, predictability, market efficiency, REIT

JEL Classification: G14, G19, R30, R31, R33

Suggested Citation

Ghysels, Eric and Plazzi, Alberto and Torous, Walter N. and Valkanov, Rossen, Forecasting Real Estate Prices (June 30, 2012). Handbook of Economic Forecasting: Vol II, G. Elliott and A. Timmermann, eds., Elsevier, 2012. Available at SSRN: https://ssrn.com/abstract=2247327

Eric Ghysels

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Alberto Plazzi

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

USI Lugano ( email )

Via Buffi 13
CH-6900 Lugano
Switzerland

HOME PAGE: http://www.people.usi.ch/plazzia/

Walter N. Torous

Massachusetts Institute of Technology ( email )

Center for Real Estate and Sloan School
Cambridge, MA 02138
United States

Rossen Valkanov (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
858-534-0898 (Phone)

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