Forecasting State- and MSA-Level Housing Returns of the US: The Role of Mortgage Default Risks

Christos Bouras, Christina Christou (), Rangan Gupta and Keagile Lesame ()
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Christos Bouras: Department of Banking and Financial Management, University of Piraeus, 18534, Piraeus, Greece
Christina Christou: School of Economics and Management, Open University of Cyprus, 2252, Latsia, Cyprus
Keagile Lesame: Department of Economics, University of Pretoria, Pretoria, 0002, South Africa

No 202037, Working Papers from University of Pretoria, Department of Economics

Abstract: We analyze the ability of an index of mortgage default risks (MDRI) for 43 states and 20 MSAs of the US derived from Google search queries, in predicting (in- and out-of-sample) housing returns of the corresponding states and MSAs, based on various panel data and time-series approaches. In general, our results tend to prefer the panel data model based on common correlated effects estimation. We highlight that growth in MDRI negatively impacts housing returns within-sample, with predictive gains primarily concentrated beyond a year. These results are robust to alternative out-of-sample periods and econometric frameworks. Given the role of house prices as a leading indicators, our results are of value to policymakers, especially at the longer-run.

Keywords: Mortgage Default Risks; Housing Returns; States and MSAs; Panel Data Predictive Models (search for similar items in EconPapers)
JEL-codes: C23 C53 R31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-05
New Economics Papers: this item is included in nep-for, nep-ore, nep-rmg and nep-ure
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Journal Article: Forecasting state- and MSA-level housing returns of the US: The role of mortgage default risks (2023)
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