We develop a theoretically-based statistical technique to identify a conservative lower bound for house prices. Leveraging a model based upon consumer and investor incentives, we are able to explain the depth of housing market downturns at both the national and state level over a variety of market environments. This approach performs well in several historical back tests and has strong out-of-sample predictive ability. When back-tested, our estimation approach does not understate house price declines in any state over the ...
Read More
We develop a theoretically-based statistical technique to identify a conservative lower bound for house prices. Leveraging a model based upon consumer and investor incentives, we are able to explain the depth of housing market downturns at both the national and state level over a variety of market environments. This approach performs well in several historical back tests and has strong out-of-sample predictive ability. When back-tested, our estimation approach does not understate house price declines in any state over the 1987 to 2001 housing cycle and only understates declines in three states during the most recent financial crisis. This latter result is particularly noteworthy given that the post-2001 estimates are performed out of- sample. Our measure of a conservative lower bound is attractive because it (1) provides a leading indicator of the severity of future downturns and (2) allows trough estimates to dynamically adjust as markets conditions change. This estimation technique could prove particularly helpful in measuring the credit risk associated with portfolios of mortgage assets as part of evaluating static stress tests or designing dynamic stress tests.
Read Less
Add this copy of How Low Can House Prices Go: Estimating a Conservative to cart. $19.43, new condition, Sold by Ingram Customer Returns Center rated 5.0 out of 5 stars, ships from NV, USA, published 2016 by Createspace Independent Publishing Platform.
Add this copy of How Low Can House Prices Go: Estimating a Conservative to cart. $37.96, good condition, Sold by Bonita rated 4.0 out of 5 stars, ships from Newport Coast, CA, UNITED STATES, published 2016 by CreateSpace Independent Publis.
