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Consensus vs. Time‐series Forecasts of US 30‐year Home Mortgage Rates

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  • Hamid Baghestani

Abstract

Accurate forecasts of the 30‐year home mortgage rate (HMR) are important to both US housing market participants and policymakers. This study compares the consensus forecasts of the HMR from the Blue Chip panel of experts with two benchmarks: the random walk forecasts (which are basically the most recent HMR available at the time of the survey) and the augmented‐autoregressive (A‐A) forecasts (which contain the past information in both the HMR and trend rate of inflation). For 1992--2005, the Blue Chip forecasts are unbiased and accurately predict directional change at the shorter but not longer forecast horizons. The random walk and A‐A forecasts, in addition to outperforming the Blue Chip, are unbiased and accurately predict directional change at all forecast horizons. Further findings indicate that the A‐A forecasts encompass those of the random walk, implying that the predictive information in the trend rate of inflation helps improve forecast accuracy. Therefore, one with access to these HMR forecasts would clearly prefer the A‐A over the Blue Chip and random walk forecasts in decision‐making.

Suggested Citation

  • Hamid Baghestani, 2008. "Consensus vs. Time‐series Forecasts of US 30‐year Home Mortgage Rates," Journal of Property Research, Taylor & Francis Journals, vol. 25(1), pages 45-60, January.
    • Handle: RePEc:taf:jpropr:v:25:y:2008:i:1:p:45-60
    DOI: 10.1080/09599910802397073
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    Cited by:

    1. Hamid Baghestani, 2017. "Do US consumer survey data help beat the random walk in forecasting mortgage rates?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1343017-134, January.

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