Using Data on Seller Behavior to Forecast Short-Run House Price Changes

Abstract

We construct a new list-price that uses the repeat-sales approach to measure house prices but for recent months uses listings data instead of transactions data. Because listings data describe the current offering price and are available essentially in real time, our index is more timely than existing house price indices in two ways. First, our index describes house values at the contract date when the price is determined rather than at the closing date when the property is transferred. As a result of this difference in timing, our index displays a stronger correlation with stock prices and less short term serial correlation than a standard repeat-sales index. Second, our index accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller become available. In a sample of nine large MSAs over the years 2008-2012, our index (i) accurately forecasts the Case-Shiller index several months in advance, (ii) outperforms forecasting models that do not use listings data, and (iii) outperforms the market's expectation as inferred from prices on Case-Shiller futures contracts.