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The predictive power of house price imbalance indicators

Author

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  • Esther Cáceres

    (Banco de España)

Abstract

Rationale The Banco de España regularly uses indicators that measure imbalances arising in the residential real estate sector to inform its quarterly decisions on the countercyclical capital buffer. This article analyses these indicators’ power to predict systemic crises. Takeaways •The residential real estate sector is particularly important for financial stability, as evidenced by the housing crisis in Spain that began in 2008. It is, therefore, essential to have early warning indicators for effective risk identification. •In the recent period, on data to 2023 Q3, house price imbalance indicators suggest that house prices remain moderate and around their equilibrium value. •After describing recent developments in these indicators, their predictive power is assessed using the AUROC metric.

Suggested Citation

  • Esther Cáceres, 2024. "The predictive power of house price imbalance indicators," Economic Bulletin, Banco de España, issue 2024/Q3.
    • Handle: RePEc:bde:journl:y:2024:i:03:n:04
    DOI: https://doi.org/10.53479/37605
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    More about this item

    Keywords

    Residential real estate sector; early warning indicators; predictive power; AUROC;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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