Working Paper: NBER ID: w2506
Authors: Karl E. Case; Robert J. Shiller
Abstract: Tests of weak-form efficiency of the market for single family homes are performed using data on repeat sales prices of 39,210 individual homes, each for two sales dates. Tests were done for Atlanta, Chicago, Dallas, and San Francisco/Oakland for 1970-86. While evidence for seasonality in real housing prices is weak, we do find some evidence of inertia in housing prices. A city-wide real log price index change in a given year tends to be followed by a city-wide real log price index change in the same direction (and between a quarter to a half as large in magnitude) in the subsequent year. However, the inertia cannot account for much of the variation in individual housing real price changes. There is so much noise in individual housing prices relative to city-wide price index changes that the R[squared] in forecasting regressions for annual real price change in individual homes is never more than .04.
Keywords: housing market; market efficiency; real estate; price index
JEL Codes: R31; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Change in citywide real log price index in one year (E30) | Change in citywide real log price index in subsequent year (E30) |
| Change in citywide real log price index in one year (E30) | Change in individual housing price changes in subsequent year (R21) |
| Change in individual housing price changes (R21) | Change in citywide real log price index (E30) |