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Regular version of the site

Article

Think national, forecast local: a case study of 71 German urban housing markets

Applied Economics. 2017. Vol. 49. No. 42. P. 4271-4297.
Kholodilin K., Siliverstovs B.

In this article, we examine whether the local indicators are able to predict the city-level housing prices and rents better than national indicators. For this purpose, we assess the forecasting ability of 126 indicators and 21 types of forecast combinations using a sample of 71 large German cities. There are several predictors that are especially useful, namely price-to-rent ratios, national-level business confidence, and consumer surveys. We also find that combinations of individual forecasts are among the top forecasting models. On average, the forecast improvements attain about 20%, measured by a reduction in root mean square error, compared to the naive models.