Trend-Spotting in the Housing Market

I create a time series of weekly ratios of Google searches in the United States on buying and selling in the real estate category of Google Trends, whereby I call this ratio the Google U.S. Housing Market BUSE index, or simply the BUSE index.¹ It expresses the number of "buy" searches for...

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Bibliographic Details
Published in:Cityscape (Washington, D.C.) D.C.), 2016-01, Vol.18 (2), p.165-178
Main Author: Askitas, Nikos
Format: Article
Language:English
Subjects:
Behavior
Cityscapes
Data Shop
Economic models
Efficient markets
Housing
Housing market
Housing price indices
Housing prices
Interest rates
Internet
Keywords
Market prices
Mortgages
Price indices
Real estate sales
Retail stores
Sales
Search engines
Securities markets
Stock exchanges
Supply
Time series
Trends
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Summary:I create a time series of weekly ratios of Google searches in the United States on buying and selling in the real estate category of Google Trends, whereby I call this ratio the Google U.S. Housing Market BUSE index, or simply the BUSE index.¹ It expresses the number of "buy" searches for each "sell" search, which I consider to be a good proxy of the number of prospective homebuyers for each prospective homeseller in the pool of prospective housing market participants by means of certain regularity assumptions on the distribution of Internet users. The BUSE index—which can be perceived as a behavioral macroeconomic indicator—has several unique, desirable properties, which make it useful for understanding and nowcasting the U.S. housing market. It has a significant correlation with the Standard & Poor's/Case-Shiller® U.S. National Home Price Index. Because the latter is monthly and is published as a 3-month moving average with a 2-month lag and the Google Trends data are weekly, the result is a short-term nowcast of housing prices in the United States. I show how these Google data can be used to create a consistent narrative of the post-bubble-burst dynamics in the U.S. housing market and propose the BUSE index as an instrument for monitoring housing market conditions in real time.
ISSN:1936-007X
1939-1935