Sequential Monitoring of Changes in Housing Prices

47 Pages Posted: 1 Mar 2020

See all articles by Lajos Horváth

Lajos Horváth

University of Utah - Department of Mathematics

Zhenya Liu

Renmin University of China; CERGAM, Aix-Marseille University

Shanglin Lu

Renmin University of China - School of Finance

Date Written: January 30, 2020

Abstract

We propose a sequential monitoring scheme to find structural breaks in real estate markets. The changes in the real estate prices are modeled by a combination of linear and autoregressive terms. The monitoring scheme is based on a detector and a suitably chosen boundary function. If the detector crosses the boundary function, a structural break is detected. We provide the asymptotics for the procedure under the stability null hypothesis and the stopping time under the change point alternative. Monte Carlo simulation is used to show the size and the power of our method under several conditions. We study the real estate markets in Boston, Los Angeles and at the national U.S. level. We find structural breaks in the markets, and we segment the data into stationary segments. It is observed that the autoregressive parameter is increasing but stays below 1.

Keywords: Sequential Change Point Detection, Weak Dependence, Linear Model, Autoregressive Model, Real Estate Market

JEL Classification: C32, C58, R30

Suggested Citation

Horváth, Lajos and Liu, Zhenya and Lu, Shanglin, Sequential Monitoring of Changes in Housing Prices (January 30, 2020). Available at SSRN: https://ssrn.com/abstract=3529058 or http://dx.doi.org/10.2139/ssrn.3529058

Lajos Horváth

University of Utah - Department of Mathematics ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States
801 581-8159 (Phone)

Zhenya Liu

Renmin University of China ( email )

School of Finance
Beijing, Beijing 100872
China

CERGAM, Aix-Marseille University ( email )

Aix-Marseille University
3 Avenue Robert Schuman,
Aix-en-Provence, 13628
France
0781668685 (Phone)

Shanglin Lu (Contact Author)

Renmin University of China - School of Finance ( email )

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

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