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Forecasting Sales and Price for Existing Single-Family Homes: A VAR Model with Error Correction

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Author Info
Zhong-guo Zhou () (Department of Finance, Real Estate and Insurance College of Business Administration and Economics California State University, Northridge Northridge, California 91330)
Abstract

In this paper we forecast demand for existing single-family housing in the United States. We first find that sales volume (sales) and median sales price (price) have unit roots. We then find that sales and price are cointegrated. We develop a vector autoregressive (VAR) model with error correction to further examine the causality between sales and price. We find that there exists a bidirectional causality relationship between sales and price. Price affects sales significantly and sales affects price weakly. With the VAR model we then forecast sales and price for existing single-family housing during the period 1991 to 1994 by using a recursive method. We find that our predictions for sales and price fit the actual data well.

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Publisher Info
Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 14 (1997)
Issue (Month): 2 ()
Pages: 155-168
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Handle: RePEc:jre:issued:v:14:n:2:1997:p:155-168

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
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  1. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," NBER Working Papers 3368, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  4. Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation, Yale University. [Downloadable!]
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  5. Paul R. Goebel & Christopher K. Ma, 1993. "The Integration of Mortgage Markets and Capital Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(4), pages 511-538. [Downloadable!] (restricted)
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Cited by:
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  1. Andre H. Gao & George H. K. Wang, 2007. "Multiple Transactions Model: A Panel Data Approach to Estimate Housing Market Indices," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 241-266. [Downloadable!]
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