"Ripple Effects" and Forecasting Home Prices in Los Angeles, Las Vegas, and Phoenix

Rangan Gupta and Stephen Miller

No 2009-05, Working papers from University of Connecticut, Department of Economics

Abstract: We examine the time-series relationship between housing prices in Los Angeles, Las Vegas, and Phoenix. First, temporal Granger causality tests reveal that Los Angeles housing prices cause housing prices in Las Vegas (directly) and Phoenix (indirectly). In addition, Las Vegas housing prices cause housing prices in Phoenix. Los Angeles housing prices prove exogenous in a temporal sense and Phoenix housing prices do not cause prices in the other two markets. Second, we calculate out-of-sample forecasts in each market, using various vector autoregessive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different cities. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points.

Keywords: Ripple effect; housing prices; forecasting (search for similar items in EconPapers)
JEL-codes: C32 R31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-01, Revised 2009-06
New Economics Papers: this item is included in nep-for, nep-geo, nep-mac and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Published in Annals of Regional Science, available on-line November 18, 2010

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https://media.economics.uconn.edu/working/2009-05.pdf Full text (original version) (application/pdf)

Related works:
Journal Article: “Ripple effects” and forecasting home prices in Los Angeles, Las Vegas, and Phoenix (2012)
Working Paper: "Ripple Effects” and Forecasting Home Prices in Los Angeles, Las Vegas, and Phoenix (2009)
Working Paper: “Ripple Effects” and Forecasting Home Prices In Los Angeles, Las Vegas, and Phoenix (2009)
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