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Are Real House Prices Likely to Decline by 47 Percent?

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  • Patric H. Hendershott

Abstract

Mankiw and Weil have estimated a demographically-driven real house price equation on annual data from the 1947-87 period and used it to forecast real house prices over the 1988-2007 period. The result is their infamous 47 percent real decline. Their equation really only fits data from the 1950s and 1960s. Not only is the post 1970 fit poor, but the cumulative in-sample forecast for the 1970-87 period is off by a factor of four. While real house prices seem more likely to decline than increase over the next two decades, the most likely decline is 10 to 15 percent, not 47 percent.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3880.

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Date of creation: Oct 1991
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Publication status: published as Regional Science and Urban Economics, January 1992, pp. 553-563
Handle: RePEc:nbr:nberwo:3880

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  1. Haurin, Donald R. & Lee, Kyubang, 1989. "A structural model of the demand for owner-occupied housing," Journal of Urban Economics, Elsevier, vol. 26(3), pages 348-360, November.
  2. Henderson, J. Vernon & Ioannides, Yannis M., 1989. "Dynamic aspects of consumer decisions in housing markets," Journal of Urban Economics, Elsevier, vol. 26(2), pages 212-230, September.
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Cited by:
  1. Lambertini, Luisa & Mendicino, Caterina & Punzi, Maria Teresa, 2013. "Expectation-driven cycles in the housing market: Evidence from survey data," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(4), pages 518-529.
  2. Gabriel Lee & Philipp Schmidt-Dengler & Bernhard Felderer & Christian Helmenstein, 2001. "Austrian Demography and Housing Demand: Is There a Connection," Empirica, Springer, Springer, vol. 28(3), pages 259-276, September.
  3. Yumi Saita & Chihiro Shimizu & Tsutomu Watanabe, 2013. "Aging and Real Estate Prices: Evidence from Japanese and US Regional Data," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-334, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  4. Pablo A. Guerron-Quintana & Ryo Jinnai, 2013. "Liquidity, Trends and the Great Recession," UTokyo Price Project Working Paper Series 015, University of Tokyo, Graduate School of Economics.
  5. Kiyohiko Nishimura & Elod Takáts, 2012. "Ageing, property prices and money demand," BIS Working Papers 385, Bank for International Settlements.
  6. Takáts, Előd, 2012. "Aging and house prices," Journal of Housing Economics, Elsevier, Elsevier, vol. 21(2), pages 131-141.
  7. Agar Brugiavini, 2002. "Savings: The Policy Debate in Europe," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 02018, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  8. Diane Macunovich, 1999. "The Baby Boom As It Ages: How Has It Affected Patterns of Consumptions and Savings in the United States?," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 7, Center for Policy Research, Maxwell School, Syracuse University.
  9. James M. Poterba, 1998. "Population Age Structure and Asset Returns: An Empirical Investigation," NBER Working Papers 6774, National Bureau of Economic Research, Inc.
  10. Roehner, Bertrand M., 1999. "Spatial analysis of real estate price bubbles: Paris, 1984-1993," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 29(1), pages 73-88, January.
  11. Marsha J. Courchane & Judith A. Giles, 2002. "A Comparison of U.S. and Canadian Residential Mortgage Markets," Econometrics Working Papers 0201, Department of Economics, University of Victoria.
  12. Saita, Yumi & Shimizu, Chihiro & Watanabe, Tsutomu, 2013. "Aging and Real Estate Prices: Evidence from Japanese and US Regional Data," HIT-REFINED Working Paper Series, Institute of Economic Research, Hitotsubashi University 2, Institute of Economic Research, Hitotsubashi University.
  13. Swan, Craig, 1995. "Demography and the demand for housing A reinterpretation of the Mankiw-Weil demand variable," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 25(1), pages 41-58, February.
  14. Ohtake, F. & Shintani, M., 1995. "The Effects of Demographics on the Japanese Housing Market," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0391, Institute of Social and Economic Research, Osaka University.
  15. Mika Kuismanen & Seppo Laakso & Heikki A. Loikkanen, 1999. "Demographic Factors and the Demand for Housing in the Helsinki Metropolitan Area," Discussion Papers, Government Institute for Economic Research Finland (VATT) 191, Government Institute for Economic Research Finland (VATT).
  16. Axel Börsch-Supan, 2006. "Demographic Change, Saving and Asset Prices: Theory and Evidence," RBA Annual Conference Volume, in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.

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