Housing Price Fundamentals through the Business Cycle

  • Michael G Wenz Northeastern Illinois University and Politechnika Czestochowa
  • William Wei-Choun Yu Anderson Forecast, Anderson School of Management, University of California-Los Angeles
Keywords: Housing, Real Estate, House Price Forecasting


We examine the fundamental determinants of nominal home price growth from 1995 to 2012 across 300 metropolitan areas in the U.S. This sample period provides a trough-to-trough time period that allows for analysis through a complete business cycle.  By using a supply-to-demand ratio for home price appreciation, we identify a straightforward and powerful method for predicting home price appreciation across markets.  We suggest an alternative and simple method for addressing endogeneity in house prices and include a comprehensive measure of human capital.  We find five significant factors: home supply growth, personal income growth, human capital, an ocean dummy, and geographic constraint. 

Author Biographies

Michael G Wenz, Northeastern Illinois University and Politechnika Czestochowa
Associate Professor, Department of Economics, Northeastern Illinois University and Visiting Professor, Faculty of Management, Politechnika Czestochowa
William Wei-Choun Yu, Anderson Forecast, Anderson School of Management, University of California-Los Angeles
Economist, UCLA Anderson Forecast


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