Using Leading Indicators to Forecast U.S. Home Sales in a Bayesian Vector Autoregressive Framework

Using Leading Indicators to Forecast U.S. Home Sales in a Bayesian Vector Autoregressive Framework This article uses Bayesian vector autoregressive models to examine the usefulness of leading indicators in predicting U.S. home sales. The benchmark Bayesian model includes home sales, price of homes, mortgage rate, real personal disposable income, and unemployment rate. We evaluate the forecasting performance of six alternative leading indicators by adding each, in turn, to the benchmark model. Out-of-sample forecast performance over three periods shows that the model that includes building permits authorized consistently produces the most accurate forecasts. Thus, the intention to build in the future provides good information with which to predict U.S. home sales. Another finding suggests that leading indicators with longer leads outperform the short-leading indicators. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Using Leading Indicators to Forecast U.S. Home Sales in a Bayesian Vector Autoregressive Framework

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1023/A:1007718725609
Publisher site
See Article on Publisher Site

Abstract

This article uses Bayesian vector autoregressive models to examine the usefulness of leading indicators in predicting U.S. home sales. The benchmark Bayesian model includes home sales, price of homes, mortgage rate, real personal disposable income, and unemployment rate. We evaluate the forecasting performance of six alternative leading indicators by adding each, in turn, to the benchmark model. Out-of-sample forecast performance over three periods shows that the model that includes building permits authorized consistently produces the most accurate forecasts. Thus, the intention to build in the future provides good information with which to predict U.S. home sales. Another finding suggests that leading indicators with longer leads outperform the short-leading indicators.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Sep 30, 2004

References

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