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Do financial indicators have directional predictability for US home sales?

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  • Hamid Baghestani
  • Ilker Kaya

Abstract

This study investigates the directional predictability of financial indicators for home sales across tranquil (1984--2005) and volatile (1972--1983 and 2006--2013) periods. We find that the mortgage rate has directional predictability for both existing and newly built home sales for up to 2005. The federal funds rate generally has directional predictability for existing (newly built) home sales in 1984--2005 (1972--1983). The term spread has directional predictability for home sales in 1972--1983 but generally not in the tranquil period of 1984--2005. Further, unlike mortgage and federal funds rates, the term spread has directional predictability for home sales in 2006--2013 and thus can help the Fed with useful information (assuming that this trend continues).

Suggested Citation

  • Hamid Baghestani & Ilker Kaya, 2016. "Do financial indicators have directional predictability for US home sales?," Applied Economics, Taylor & Francis Journals, vol. 48(15), pages 1349-1360, March.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:15:p:1349-1360
    DOI: 10.1080/00036846.2015.1100253
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    1. Fisher, Irving, 1907. "The Rate of Interest," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number fisher1907.
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    Cited by:

    1. Thomas M. Fullerton & Elías D. Saenz-Rojo & Adam G. Walke, 2017. "Yield spreads, currency movements, and recession predictability for southern border economies in the United States," Applied Economics, Taylor & Francis Journals, vol. 49(30), pages 2910-2921, June.
    2. Oğuzhan Çepni & Rangan Gupta & Mark E. Wohar, 2020. "The role of real estate uncertainty in predicting US home sales growth: evidence from a quantiles-based Bayesian model averaging approach," Applied Economics, Taylor & Francis Journals, vol. 52(5), pages 528-536, January.
    3. Rangan Gupta & Chi Keung Marco Lau & Vasilios Plakandaras & Wing-Keung Wong, 2019. "The role of housing sentiment in forecasting U.S. home sales growth: evidence from a Bayesian compressed vector autoregressive model," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 2554-2567, January.
    4. Hamid Baghestani & Ajalavat Viriyavipart, 2019. "Do factors influencing consumer home-buying attitudes explain output growth?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(5), pages 1104-1115, August.
    5. Hamid Baghestani, 2022. "Mortgage rate predictability and consumer home-buying assessments," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(3), pages 593-603, July.

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