A New Index of Housing Sentiment
Stig V. Møller () and
Thomas Pedersen ()
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Stig V. Møller: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
CREATES Research Papers from Department of Economics and Business Economics, Aarhus University
We propose a new measure for housing sentiment and show that it accurately tracks expectations about future house price growth rates. We construct the housing sentiment index using partial least squares on household survey responses to questions about buying conditions for houses. We ?find that housing sentiment explains a large share of the time-variation in house prices during both boom and bust cycles and it strongly outperforms several macroeconomic variables typically used to forecast house prices.
Keywords: Housing sentiment; house price forecastability; partial least squares; dynamic model averaging (search for similar items in EconPapers)
JEL-codes: C53 E3 G1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2016-32
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