Forecasting Sales and Price for Existing Single-Family Homes: A VAR Model with Error Correction

Zhong-guo Zhou ()
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Zhong-guo Zhou: Department of Finance, Real Estate and Insurance College of Business Administration and Economics California State University, Northridge Northridge, California 91330, http://www.csun.edu/~hfbus021/

Journal of Real Estate Research, 1997, vol. 14, issue 2, pages 155-168

Abstract: In this paper we forecast demand for existing single-family housing in the United States. We first find that sales volume (sales) and median sales price (price) have unit roots. We then find that sales and price are cointegrated. We develop a vector autoregressive (VAR) model with error correction to further examine the causality between sales and price. We find that there exists a bidirectional causality relationship between sales and price. Price affects sales significantly and sales affects price weakly. With the VAR model we then forecast sales and price for existing single-family housing during the period 1991 to 1994 by using a recursive method. We find that our predictions for sales and price fit the actual data well.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1997
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