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Think national, forecast local: a case study of 71 German urban housing markets

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  • Konstantin A. Kholodilin
  • Boriss Siliverstovs

Abstract

In this article, we examine whether the local indicators are able to predict the city-level housing prices and rents better than national indicators. For this purpose, we assess the forecasting ability of 126 indicators and 21 types of forecast combinations using a sample of 71 large German cities. There are several predictors that are especially useful, namely price-to-rent ratios, national-level business confidence, and consumer surveys. We also find that combinations of individual forecasts are among the top forecasting models. On average, the forecast improvements attain about 20%, measured by a reduction in root mean square error, compared to the naive models.

Suggested Citation

  • Konstantin A. Kholodilin & Boriss Siliverstovs, 2017. "Think national, forecast local: a case study of 71 German urban housing markets," Applied Economics, Taylor & Francis Journals, vol. 49(42), pages 4271-4297, September.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:42:p:4271-4297
    DOI: 10.1080/00036846.2017.1279272
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