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Housing bubble implications: The perspective of housing price predictability

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  • Meichi Huang

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    (National Taipei University)

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    Abstract

    The paper extracts housing bubble implications from the perspective of housing price predictability. Specifically, it examines predictive powers of the good-time-to-buy (GTTB) index and the federal funds rate in nationwide and state-level housing price returns by means of out-of-sample tests suggested in Rapach and Wohar (2006). The GTTB index is used to proxy for households' expectations, and the interest rate represents the economic fundamental. The empirical results indicate the predictive advantage of the GTTB index over the federal funds rate, and suggest higher vulnerability to bubble-like housing cycles in the housing markets of California, New York, New Jersey, Washington, Massachusetts and Arizona than other states. Overall, the study sheds insights into divergent predictability patterns between in-sample and out-of-sample forecasts, those between aggregate and disaggregate housing price dynamics, and those across state-level housing markets.

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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 33 (2013)
    Issue (Month): 1 ()
    Pages: 586-596

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    Handle: RePEc:ebl:ecbull:eb-12-00735

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    Related research

    Keywords: predictability; the GTTB(good time to buy) index; federal funds rate; housing bubble;

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