European Journal of Business Science and Technology 2016, 2(2):91-106 | DOI: 10.11118/ejobsat.v2i2.55

Housing Price Fundamentals through the Business Cycle

Michael G. Wenz1,2, William Wei-Choun Yu3
1 Politechnika Częstochowska, Poland
2 Northeastern Illinois University, Chicago, USA
3 University of California, Los Angeles, USA

We examine the fundamental determinants of nominal home price growth from 1995 to 2012 across 300 metropolitan areas in the U.S. This sample period provides a trough-to-trough time period that allows for analysis through a complete business cycle. By using a supply-to-demand ratio for home price appreciation, we identify a straightforward and powerful method for predicting home price appreciation across markets. We suggest an alternative and simple method for addressing endogeneity in house prices and include a comprehensive measure of human capital. We find five significant factors: home supply growth, personal income growth, human capital, an ocean dummy, and geographic constraint.

Keywords: housing, real estate, house price forecasting
JEL classification: R2, R31

Published: December 30, 2016  Show citation

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Wenz, M.G., & Yu, W.W. (2016). Housing Price Fundamentals through the Business Cycle. European Journal of Business Science and Technology, 2(2), 91-106. doi: 10.11118/ejobsat.v2i2.55
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