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Housing Price Fundamentals through the Business Cycle

Author

Listed:
  • Michael G. Wenz

    (Politechnika Częstochowska, Poland
    Northeastern Illinois University, Chicago, USA)

  • William Wei-Choun Yu

    (University of California, Los Angeles, USA)

Abstract

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.

Suggested Citation

  • Michael G. Wenz & William Wei-Choun Yu, 2016. "Housing Price Fundamentals through the Business Cycle," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 2(2), pages 91-106.
    • Handle: RePEc:men:journl:v:2:y:2016:i:2:p:91-106
    DOI: 10.11118/ejobsat.v2i2.55
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    References listed on IDEAS

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    More about this item

    Keywords

    housing; real estate; house price forecasting;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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