House Price Developments Research Articles

Combining multiplex networks and time series: A new way to optimize real estate forecasting in New York using cab rides

Creating predictive models to process large amounts of information is a major challenge for which the latest big data techniques provide solutions. In this paper, we present a methodology based on time series algorithms and multiplex networks focused on Big Data solutions. This methodology allows to process a large amount of information and obtain a way to group the most effective and useful information, allowing to solve problems with a large number of time-varying variables in an efficient way. This approach offers the possibility of predicting the evolution of housing prices using cab rides between different areas of the city. The methodology presented to combine all this information is based both on the original use of some unsupervised machine learning techniques and on the use of certain attributes of the time series and their representation as a complex multiplex network, achieving a very significant reduction in the dimensionality of the resulting data representation. The result is a forecast that reduces the representation of cab rides to a small dataset able to forecast real estate prices.

Research on China's Risk of Housing Price Contagion Based on Multilayer Networks.

The major issue in the evolution of housing prices is risk of housing price contagion. To model this issue, we constructed housing multilayer networks using transfer entropy, generalized variance decomposition, directed minimum spanning trees, and directed planar maximally filtered graph methods, as well as China’s comprehensive indices of housing price and urban real housing prices from 2012 to 2021. The results of our housing multilayer networks show that the topological indices (degree, PageRank, eigenvector, etc.) of new first-tier cities (Tianjin, Qingdao, and Shenyang) rank higher than those of conventional first-tier cities (Beijing, Shanghai, Guangzhou, and Shenzheng).

Monetary policy and house prices in emerging markets

PurposeThis study aims to focus on two-way interaction between monetary policy and house prices in emerging economies.Design/methodology/approachThis study uses panel structural vector autoregressive model.FindingsThe results show that real house prices decrease in response to a contractionary monetary policy shock. However, relative to advanced economies, the reaction of the prices is limited in emerging economies, pointing out the structural differences in emerging economies including the small size of the mortgage market and the lack of a well-functioning secondary market in housing finance. This study further finds that monetary policy is tightened in response to a positive shock to house prices. However, this response is also weak when compared to that response in advanced economies.Research limitations/implicationsThese findings suggest that house price developments should not be prior target for monetary policies in emerging economies unless they become problem for financial stability or inflationary concerns.Originality/valueUsing a sample of inflation targeting emerging countries, this study contributes to the literature by conducting both panel setting and single-country analysis to explore the two-way dynamic relationships between the monetary policy and housing market in emerging economies.

Primary Housing Market in the Context of Wages and Creditworthiness in Selected Cities in Poland in the Years 2006-2019

Purpose: The paper presents the evolution of average unit prices of apartments in selected primary local markets in Poland in 2006-2019. The period covers the end of the price increase phase, their correction, and then stabilization and another upward phase. A characteristic feature of the study is that prices of apartments were presented not only in nominal terms, but also in several real term approaches. Design/Methodology/Approach: The research was conducted using publicly available data on residential prices in selected cities. Prices were adjusted in a traditional way, i.e. by means of inflation indices, but also through the perspective of salary growth and creditworthiness. The results were presented graphically by means of charts. Findings: It turns out that the above approach to the evolution of housing prices may lead to conclusions that are quite different from the stereotypical ones concerning the assessment of the housing market situation, its forecasts, as well as the assessment of threats and consequences of relations among prices viewed in varying ways. In particular, it has been shown that the observed tendencies do not seem favorable, since they lead to the perception of an apartment as an exceptionally expensive good, which, unfortunately, will not become apparent until turbulence of interest rates and income hit the market. Practical Implications: The results of the research can be applied to forecasts of housing market trends and are particularly useful to developers, banks, realtors, potential apartment buyers as well as the government bodies responsible for housing policy. Originality/Value: Similar research has not yet been conducted in the local housing markets in Poland. The conclusions from the study can provide an important signal regarding the direction of changes on the housing market.

The prices of residential land in German counties

We estimate changes in the value and price of residential land for 379 German counties (“Landkreise”) from 2014 to 2018 using a total of 42,647 observations. In doing so, we build a database for the cost of housing structures and residential land values at the county-level. We use the two-step residual method that decomposes the value of a home into its structure cost and land value. Despite the short time series, we show that the price of residential land has increased significantly more than the structure costs and house prices in most of the German counties. Specifically, the average land values increased by 27%, while the average structure and home values increased only by 14% and 20%, respectively. Our findings thus imply that cycles in the German land values are more likely to affect the evolution of house prices in the future. Furthermore, we show that our estimated land prices vary significantly to the current land price valuation in two of the German federal states (Hessen and Thüringen).

The Legacy of Economic Recession in Terms of Over-Indebtedness: A Framework and Review of the Evidence

With the expansion of credit, low interest rates and overly optimistic expectations about future economic and housing price developments, mortgage lending soared in most OECD countries in the run-up to the 2008 global economic crisis. The crisis revealed the hidden epidemic of over-indebtedness, which continues to overshadow the lives of millions in rich countries. In the wake of the global economic crisis, the household debt crisis led to worsening economic conditions and put pressure on government finances, which caused further income shocks in the form of austerity measures such as social welfare cuts and higher taxes. This article is based on a scoping review aimed at summarising and reflecting on the available literature. It analyses the effects of over-indebtedness on individuals and societies across six OECD countries: Finland, Germany, the Netherlands, Norway, the UK and the US.

House price history, biased expectations, and credit cycles: The role of housing investors

AbstractUsing the Michigan Survey, I show that consumers' house price expectations depend upon the recent history of house price developments in their city of residence. Forecast errors are predictable: people systematically underestimate momentum and neglect mean reversion, remaining over‐optimistic for several quarters after a prolonged trend of house price growth, and vice versa. Housing appreciation also increases the share of consumers who believe that real estate is a good investment. Combining loan‐level data from Freddie Mac to regional measures of housing sentiment, I show that an exogenous shift in house price expectations leads to an increase in leverage on new mortgage originations. The effect is concentrated on investment properties and among prime borrowers in nonrecourse states.

International Real Estate Review

The aim of this paper is to test whether Google search volume indices can be used to predict house prices and identify bubbles in the housing market. We analyze the data that pertain to the 2006?2007 U.S. housing bubble, taking advantage of the heterogeneous house price development in both bubble and non-bubble states in the U.S. Using 204 housing-related keywords, we test both single search terms and indices that comprise search term sets to see whether they can be used as housing bubble indicators. We find that several keywords perform very well as bubble indicators. Among all of the keywords and indices tested, the Google search volume for ¡§Housing Bubble¡¨ and ¡§Real Estate Agent¡¨, and a constructed index that contains the twelve best-performing search terms score the highest at both detecting bubbles and not erroneously detecting non-bubble states as bubbles. A new housing bubble indicator may help households, investors, and policy makers receive advanced warning about future housing bubbles. Moreover, we show that the Google search outperforms the well-established consumer confidence index in the U.S. as a leading indicator of the housing market.

Unravelling the Secrets of Inflation in the Euro Area – A Frequency Decomposition Approach

Abstract Research background: The study contributes to the field of monetary economics. In the practice of monetary policy, all central banks have a vivid interest in distinguishing between signals and noise in the data. Purpose: The study investigates from a frequency-domain perspective the interlinkages between money, loans, inflation and real GDP for the euro area. Research methodology: The research methodology includes a combination of a time-series single-equation estimation approach with a frequency decomposition analysis. Results: Broad monetary measures are found to add positively and significantly to euro area inflation over longer horizons and so do loan developments. Over medium-term horizons, real economic and exchange rate developments seem to exert a significant impact. Over shorter horizons, none of the variables under consideration affects inflation in a significant way. Robustness checks confirm the overall results. Monetary aggregates also seem to explain house price developments at lower frequencies. In addition, real GDP and exchange rate (possibly reflecting an income effect) exert a strong and significant impact, while stock prices show a substitution effect. Novelty: The paper adds to the studies focusing on the driving forces of inflation and growth over various time horizons, with the conclusion that central banks should adopt medium-term orientation and always closely monitor real, monetary and exchange rate developments in conjunction.

The Impact of Credit for House Price Overvaluations in the Euro Area: Evidence From Threshold Models

The critical role of house prices for macroeconomic and financial stability is widely acknowl-edged since the global financial crisis. While house prices showed spectacular increases and even a bubble-like behaviour in the pre-crisis years, their fall thereafter was accompanied by deep recessions in many countries. Loose monetary conditions, such as the easy availability of credit, are often blamed to be fuelling such booms. In this paper, the link between credit and house prices is investigated for the euro area in a nonlinear model framework. This choice is motivated by the idea that the linkages between these two variables can be governed by a regime-switching behaviour. Threshold VAR (TVAR) models are estimated, which comprise real house price and credit developments, business and monetary conditions. Optimal breakpoints are determined via a grid search. The relationship between the variables is not stable. If output growth and interest rate changes serve as thresholds, two regimes can be distinguished. Conversely, if house prices and credit control the regime change, three regimes are more appropriate. Nonlinear impulse responses suggest that credit developments respond to house prices, while the reverse causality is less significant. Thus, the modest recovery of credit at the current edge can only be partially attributed to the recent acceleration of house prices in the euro area.

Real estate boom in Chile and fundamentals on house prices

This article studies the fundamentals of housing prices based on the Real Index of Housing Prices (IRPV), given that in recent times in Chile there has been a sustained increase in price levels and seeks to find evidence on the existence of a possible speculative bubble in the real estate market. Following the methodology of various Chilean and international authors, the Engle & Granger Co-integration methodology was applied. Furthermore, the results of the previous methodology were compared using the Johansen Co-integration test. Then a method to find structural breaks is applied. As a result, evidence is found to not reject the existence of a bubble in the real estate market. It is found that only interest rates co-integrate in the long term with the evolution of house prices, while the other fundamentals present a spurious relationship.

Financing housing and house prices in China

PurposeThis paper aims to examine the evolution of house prices in China and especially the effects of different financing channels on China’s house prices.Design/methodology/approachThe author use the own theoretical framework and proceed to test the testable hypotheses by using the autoregressive distributed lag bounds test approach for cointegration analysis and the unrestricted error correction model. Quarterly time series data from Q1 2002 to Q2 2016 are used.FindingsThe results suggest that in the short run, bank loans to real estate development and scale of shadow banking have significant positive effects on house prices. In the long run, the scale of shadow banking and disposable income affects house prices positively and significantly.Originality/valueThis study provides more insights into how and to the extent different financing channels affect China’s house prices, particularly the impact of shadow banking on the house prices.

Loan-to-Value Limits and House Prices

This study evaluates the effect of loan-to-value (LTV) limits on house prices. The identification strategy exploits variation in LTV limits induced by Hong Kong Monetary Authorities’ decision to introduce differentiated LTV limits anchored on the value of the property, which allows us to observe the counterfactual house price development. We estimate that a one-percentage-point decrease in LTV limits reduces the house price growth by 0.8 percentage points. Overall, our results document that macro prudential policies, which regulate access to financing, are an effective policy tool to control house price growth.

Housing Prices and Money Demand: Empirical Evidence in Selected MENA Countries

Abstract This paper examines the links between housing and money empirically in a money demand framework for a panel of five Middle East and North Africa (MENA) countries using quarterly data from 2007Q3 to 2014Q4 with the inclusion of house prices as a variable representing the developments in housing markets. We applied the Pool Mean Group Estimation technique to estimate the long-run and short-run dynamic relationships in money demand model. Empirical results provide the evidence that higher house prices lead to a rise in M2 demand in long-run and short-run estimations. This finding may explain the importance influence of the house price developments on monetary policy in MENA countries. The results confirm that the cross-country heterogeneity of money holdings is also connected with structural features of the housing market.

Political representation and effects of municipal mergers

AbstractWe study the effects of municipal mergers using novel geocoded data on local public sector jobs and local politicians' place of residence. We find that the mergers had no effects on municipal expenditures overall after eight years. However, the mergers led to highly unequal geographic political representation in the post-merger councils among the merged municipalities. Small and politically marginalized municipalities experienced a substantial reduction in local public jobs in administration and health and social care services relative to the municipalities with stronger representation. Development of house prices suggests that the quality of the service-tax bundle deteriorated in these politically marginalized municipalities.

Modeling and elucidation of housing price

It is widely acknowledged that the value of a house is the mixture of a large number of characteristics. House price prediction thus presents a unique set of challenges in practice. While a large body of works are dedicated to this task, their performance and applications have been limited by the shortage of long time span of transaction data, the absence of real-world settings and the insufficiency of housing features. To this end, a time-aware latent hierarchical model is developed to capture underlying spatiotemporal interactions behind the evolution of house prices. The hierarchical perspective obviates the need for historical transaction data of exactly same houses when temporal effects are considered. The proposed framework is examined on a large-scale dataset of the property transaction in Beijing. The whole experimental procedure strictly conforms to the real-world scenario. The empirical evaluation results demonstrate the outperformance of our approach over alternative competitive methods. We also group housing features into both external and internal clusters. The further experiment unveils that external component shapes house prices much more heavily than the internal one does. More interestingly, the inference of latent neighborhood value in our model is empirically shown to be able to lessen the dependence on the critical external cluster of features in house price prediction.

Measuring heterogeneity of house price developments in Hungary, 1990–2016

This study presents the detailed methodology of generating house price indices for the Hungarian market. The index family is an expansion of the Hungarian housing market statistics in several regards. The nationwide index is derived from a database starting from 1990, and thus the national index is regarded as the longest in comparison to the house price indices available so far. The long time series allow us to observe and compare the real levels of house prices across economic cycles. Another important innovation of this index family is its ability to capture house developments by regions and settlement types, which sheds light on the strong regional heterogeneity underlying the Hungarian housing market.

The Effects of Monetary Policy on House Prices in Spain: the role of the economic and monetary union membership in the housing bubble prior to the great recession

Aim: This paper aims to discover the evolution of monetary transmission in Spain by focusing on the short-term interest rate, credit aggregates and house prices through different stages of economic development and European integration between 1975 and 2008. In addition, the analysis devotes special attention to the interval of the last housing boom, in order to reveal the importance of the interest rate policy of the ECB.Design / Research methods: The study applies a tri-variate autoregressive model assigned to three overlapping periods outlined by regime shifts in the Spanish economy. The estimation output determines the strength and persistency of the links between interest rates, credit aggregates and house prices. Consequently, the results of the econometric analysis provide proper base for comparison in order to identify the dominating channels of monetary transmissions through a prolonged period.Conclusions / findings: It is found that the transmission mechanism in Spain essentially altered over time since 1975. At the beginning of the full analysed interval the role of the credit channel was dominant, then its importance gradually diminished. After the EMU accession the traditional interest rate channel became the leading factor with an intensified and more persistent effect on house prices.Originality / value of the article: While there are numerous researches aimed at estimating the impact of monetary policy on the real economy, empirical studies focusing exclusively on the link between interest rate policy and house prices in Spain are still rare. As the present paper concentrates solely on the Spanish characteristics through extended interval, the study provides country-specific inferences.Implications of the research: Understanding the mechanism of the monetary policy effects on the housing sector is an essential aspect of designing policy interventions aimed at keeping house price development in check.Limitations of the research: Despite the significant results of the empirical analysis, the excessively dynamic increase in the property prices suggests that the factor of irrational expectations also played important role in the latest Spanish housing bubble.Key words: Monetary policy, VAR, ECB, Housing boom, Monetary transmission mechanismJEL: E52, E58.

Diffusion and Risks of House Prices in the Netherlands

The rate of home-ownership has increased significantly in many countries over the past decades. One motivating factor for this increase has been the creation of wealth through the accumulation of housing equity, which also forms the basic tenet of the asset-based welfare system. In generating the home equity, house price developments play an important role. Generally, house prices show an increasing trend over long time period, however, there are short term negative appreciations that may have inherent risks for the housing equity. Following the 2007-08 Global Financial Crisis (GFC), for example, the collapse of house prices has caused many recent home buyers to run into negative equity. Some housing researchers and experts have suggested that a better understanding of the spatial diffusion mechanisms of house prices will aid resuscitating the housing market after the GFC. Others also advocated adopting insurance schemes to protect the home equity that yields the welfare benefits. Unfortunately, however, little research insight exists on the Dutch house price diffusion process, although there are empirical results for countries such as the UK, US and China, where the contexts differ from the Netherlands. Furthermore, the current existing home-value insurance scheme in the literature is found to be less efficient and eliminates only up to 50% of the house price risks. This dissertation covers important aspects of house price diffusion and risks in the Netherlands. The aim is to better understand the diffusion mechanism and the risks of house prices, while it also contributes to the measurement of these housing risks. More specifically, there are three objectives: first, to discover the diffusion mechanism of house prices in the Netherlands and the pattern particularly from the capital Amsterdam; second, to examine the spatial distribution of the house price risk; and third, to investigate the efficiency of the index-based home-value insurance for reducing the house price risk in the Dutch context.

Overoptimism and house price bubbles

The paper explores the significance of overoptimism for house prices in Denmark using both aggregated data from the Danish Consumer Expectations Survey as well as the underlying household-level microdata matched with administrative register data at a household level. The results indicate that house price developments are partly driven by sentiments decoupled from underlying economic fundamentals. This seems especially to have been the case during the strong house price booms in the mid-1980 s and the mid-2000 s, where overoptimism might have accounted for 15–20% of the house prices' deviation from a constant growth trend. Furthermore, overoptimistic households were more likely to purchase real estate in the 2000 s compared to other households, and they leveraged more when purchasing real estate. There seems thus to be a separate “confidence” channel in the determination of house prices in addition to the variables usually found in standard macroeconomic house-price models.