Have housing value indicators changed during COVID? Housing value prediction based on unemployment, construction spending, and housing consumer price index

Abstract

Purpose Housing market research involves observing the relationships between housing value and its indicators. However, recent literature indicates that the disruption of the COVID-19 pandemic could have an impact on the forecasting properties of some of the housing indicators. This paper aims to observe the relationships between the home value index and three potential indicators to verify their forecasting properties pre- and post-COVID-19 and provide general recommendations for time series research post-pandemic. Design/methodology/approach This study features three vector autoregression (VAR) models constructed using the home value index of the USA, together with three indicators that are of interest according to recent literature: the national unemployment rate, private residential construction spending (PRCS) and the housing consumer price index (HCPI). Findings Unemployment, one of the prevalent indicators for housing values, was compromised as a result of the COVID-19 pandemic, and a new indicator for housing value in the USA, PRCS, whose relationship with housing value is robust even during the COVID-19 pandemic and HCPI is a more significant indicator for housing value than the prevalently cited All-Item consumer price index (CPI). Originality/value The study adds residential construction spending into the pool of housing indicators, proves that the finding of region-specific study indicating the unbounding of housing prices from unemployment is applicable to the aggregate housing market in the USA, and improves upon such widely accepted belief that overall inflation is a key indicator for housing prices and proves that the CPI for housing is a vastly more significant indicator.

Forecasting Total and Type-Specific Non-Residential Building Construction Spending: The Case Study of the United States and Lessons Learned

“…The forecasting results for TTLCON, PNRESCON, and PLODGCON are depicted in Figure 5. The COVID-19 pandemic caused major disruptions in the economy, resulting in the disbanding of some of the established regression-based forecasting models prior to the pandemic [22,36]. The forecasting results from this paper show that the disruptions in construction spending induced by the pandemic vary distinctively by construction type.…”

“…In housing, high construction costs typically lead to higher housing values [18,19]. For residential/housing development, changes in construction cost may precisely be in response to demand fluctuations, as construction cost is known to be strongly correlated with macroeconomic conditions that also impact housing prices [3,20,21]; the causal relationship between housing value and construction spending was found to be bidirectional [22], and positive correlation was discovered between construction cost, residential construction spending, and housing value [10]. On the other hand, there are types of development that are negatively impacted by construction cost escalations.…”

Guest editorial: Predictability of housing prices in the times of crises: new trends, methodologies, and techniques

“…The special issue includes a paper titled “ Have housing value indicators changed during COVID? Housing value prediction based on unemployment, construction spending, and housing consumer price index ” (Zhang and Yang, 2023). This research is driven by the concept that the pandemic may have altered the predictive power of traditional housing indicators.…”

“…This research is driven by the concept that the pandemic may have altered the predictive power of traditional housing indicators. The study by Zhang and Yang (2023) centers its attention on the home value index within the USA, exploring its connections with three essential indicators: the housing consumer price index (HCPI), the national unemployment rate and private residential construction spending (PRCS).…”

Resilience of the United States Economy to External Shocks

“…A research goal was outlined for the research problem. The aim of the article is to conduct a multidimensional comparative analysis of unemployment rates, the number of unemployed people, CPI indices (Zhang, Yang, 2023;Zhang, 2023) in the United States from January 2018 to September 2023. The research hypothesis adopted in the study is as follows: it is assumed that the US economy showed resilience to such external shock as COVID pandemic, and in due to this resilience, increase in unemployment in April 2020 in the United States was averted in 2023.…”