Integrating Real Estate Market Conditions into Home Price Forecasting Systems

Market condition indicators are reviewed here as candidates for improved short-term home price forecasting. Medium- to longer-term housing price primary drivers are quite well known, such as employment, income, supply constraints, and interest rates. Shorter-term forecasts with improved accuracy on turning points present a greater challenge and require the use of market condition indicators. Here we demonstrate the power of a variety of market-based variables that might be considered in any future research on short-term home price forecasting. Such research may help us better understand potential housing bubbles and turning points in market prices. As data continues to improve, we can perform such analysis across much of the United States on a near-real time basis in smaller and smaller sub-markets.