The Time-Series Properties on Housing Prices: A Case Study of the Southern California Market
Rangan Gupta () and
Stephen Miller ()
No 2009-10, Working papers from University of Connecticut, Department of Economics
We examine the time-series relationship between housing prices in eight Southern California metropolitan statistical areas (MSAs). First, we perform cointegration tests of the housing price indexes for the MSAs, finding seven cointegrating vectors. Thus, the evidence suggests that one common trend links the housing prices in these eight MSAs, a purchasing power parity finding for the housing prices in Southern California. Second, we perform temporal Granger causality tests revealing intertwined temporal relationships. The Santa Anna MSA leads the pack in temporally causing housing prices in six of the other seven MSAs, excluding only the San Luis Obispo MSA. The Oxnard MSA experienced the largest number of temporal effects from other MSAs, six of the seven, excluding only Los Angeles. The Santa Barbara MSA proved the most isolated in that it temporally caused housing prices in only two other MSAs (Los Angels and Oxnard) and housing prices in the Santa Anna MSA temporally caused prices in Santa Barbara. Third, we calculate out-of-sample forecasts in each MSA, using various vector autoregressive (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 MSAs. 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: Housing prices; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-for and nep-ure
Date: 2009-03, Revised 2009-12
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Published in Journal of Real Estate Finance and Economics, April 2012
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Working Paper: The Time-Series Properties of Housing Prices: A Case Study of the Southern California Market (2009)
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