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Abstract Details

Activity Number: 247
Type: Contributed
Date/Time: Monday, July 30, 2012 : 2:00 PM to 3:50 PM
Sponsor: Business and Economic Statistics Section
Abstract - #305080
Title: What Unemployment Data Can Tell Us About House Prices: Stabilizing a Strong but Unstable Connection
Author(s): Vladimir Ladyzhets*+
Companies: Lincoln Financial Group
Address: 38 Kinne Rd, Glastonbury, CT, 06033-3814, United States
Keywords: finance ; forecasting ; regression model averaging ; house price index ; unemployment rate

It is well known that long periods of high unemployment have a significant adverse effect on real estate prices. However, the connection between unemployment and house price is very unstable. It varies significantly for different historical periods and, if no stabilizing technique is applied, the unemployment-based house price estimates produced by regression models fitted into different historical periods are vastly different and cannot be considered reliable for practical purposes. We have developed a method for building robust models for calculating unemployment-based house price estimates under given unemployment scenarios. This method was employed to build a library of unemployment-to-house price index models which includes a nationwide model and 20 MSA level models that encompass all areas covered by the Case-Shiller Indices.

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