Board of Governors of the Federal Reserve System

February 2014

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

Elliot Anenberg and Steven Laufer

Abstract:

We construct a new "list-price index" that accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller. Our index is based on the repeat-sales approach but for recent months uses listings data, which are available essentially in real time, instead of transactions data, which become available with signiffcant lags. Our index methodology is motivated by a simple model of the home-selling problem that shows how listings variables such as the list price and marketing time help predict the final sales price. In a sample of three 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 future contracts.

Keywords: House price indices, house price forecasting, housing market microstructure

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