Forecasting Dynamic Investment Timing under the Cyclic Behavior in Real Estate
Author
Start Page / End Page
Volume
Issue Number
Year
Publication
Changha Jin and Terry V. Grissom
105 / 125
11
2
2008
International Real Estate Review
Abstract
This paper applies the Hodrck-Prescott (HP) filter to forecast short-term residential real estate prices under cyclical movements. We separate the trend component from the cyclical component. We show that each regional residential market reacts not only to previous price movements, but also that these regional markets react to previous shocks under Auto Regressive Integrated Moving Average (ARIMA) modeling. Using the S&P Case-Shiller Home Price Index, we compare our forecast to index values from the Chicago Mercantile Exchange (CME) Housing Futures and Options. Our study identifies possible systematic errors from the different price adjustments reflecting current market situations.