The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today
I show that house prices can be modeled using machine learning (kNN and tree-bagging) and a small dataset composed of macroeconomic factors (MEF), including an inflation metric (CPI), US Treasury rates (10-yr), Gross Domestic Product (GDP), and portfolio size of central banks (ECB, FED). This set of...
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MDPI AG
2025-04-01
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| author | Nicolas Houlié |
| author_facet | Nicolas Houlié |
| author_sort | Nicolas Houlié |
| collection | DOAJ |
| description | I show that house prices can be modeled using machine learning (kNN and tree-bagging) and a small dataset composed of macroeconomic factors (MEF), including an inflation metric (CPI), US Treasury rates (10-yr), Gross Domestic Product (GDP), and portfolio size of central banks (ECB, FED). This set of parameters covers all the parties involved in a transaction (buyer, seller, and financing facility) while ignoring the intrinsic properties of each asset and encompassing local (inflation) and liquidity issues that may impede each transaction composing a market. The model here takes the point of view of a real estate trader who is interested in both the financing and the price of the transaction. Machine learning allows for the discrimination of two periods within the dataset. First, and up to 2015, I show that, although the US Treasury rates level is the most critical parameter to explain the change of house-price indices, other macroeconomic factors (e.g., consumer price indices) are essential to include in the modeling because they highlight the degree of openness of an economy and the contribution of the economic context to price changes. Second, and for the period from 2015 to today, I show that, to explain the most recent price evolution, it is necessary to include the datasets of the European Central Bank programs, which were designed to support the economy since the beginning of the 2010s. Indeed, unconventional policies of central banks may have allowed some institutional investors to arbitrage between real estate returns and other bond markets (sovereign and corporate). Finally, to assess the models’ relative performances, I performed various sensitivity tests, which tend to constrain the possibilities of each approach for each need. I also show that some models can predict the evolution of prices over the next 4 quarters with uncertainties that outperform existing index uncertainties. |
| format | Article |
| id | doaj-art-700df2c1a18648f8b8649faef089f0b9 |
| institution | DOAJ |
| issn | 2227-9091 |
| language | English |
| publishDate | 2025-04-01 |
| publisher | MDPI AG |
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| series | Risks |
| spelling | doaj-art-700df2c1a18648f8b8649faef089f0b92025-08-20T03:12:16ZengMDPI AGRisks2227-90912025-04-011358110.3390/risks13050081The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to TodayNicolas Houlié0Institute of Geophysics, Seismology and Geodynamics, ETH Zurich, Sonnegstrasse 5, 8002 Zurich, SwitzerlandI show that house prices can be modeled using machine learning (kNN and tree-bagging) and a small dataset composed of macroeconomic factors (MEF), including an inflation metric (CPI), US Treasury rates (10-yr), Gross Domestic Product (GDP), and portfolio size of central banks (ECB, FED). This set of parameters covers all the parties involved in a transaction (buyer, seller, and financing facility) while ignoring the intrinsic properties of each asset and encompassing local (inflation) and liquidity issues that may impede each transaction composing a market. The model here takes the point of view of a real estate trader who is interested in both the financing and the price of the transaction. Machine learning allows for the discrimination of two periods within the dataset. First, and up to 2015, I show that, although the US Treasury rates level is the most critical parameter to explain the change of house-price indices, other macroeconomic factors (e.g., consumer price indices) are essential to include in the modeling because they highlight the degree of openness of an economy and the contribution of the economic context to price changes. Second, and for the period from 2015 to today, I show that, to explain the most recent price evolution, it is necessary to include the datasets of the European Central Bank programs, which were designed to support the economy since the beginning of the 2010s. Indeed, unconventional policies of central banks may have allowed some institutional investors to arbitrage between real estate returns and other bond markets (sovereign and corporate). Finally, to assess the models’ relative performances, I performed various sensitivity tests, which tend to constrain the possibilities of each approach for each need. I also show that some models can predict the evolution of prices over the next 4 quarters with uncertainties that outperform existing index uncertainties.https://www.mdpi.com/2227-9091/13/5/81real estate pricesfinancial regulationcapital managementnon-conventional policies |
| spellingShingle | Nicolas Houlié The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today Risks real estate prices financial regulation capital management non-conventional policies |
| title | The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today |
| title_full | The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today |
| title_fullStr | The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today |
| title_full_unstemmed | The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today |
| title_short | The Impact of Economic Policies on Housing Prices: Approximations and Predictions in the UK, the US, France, and Switzerland from the 1980s to Today |
| title_sort | impact of economic policies on housing prices approximations and predictions in the uk the us france and switzerland from the 1980s to today |
| topic | real estate prices financial regulation capital management non-conventional policies |
| url | https://www.mdpi.com/2227-9091/13/5/81 |
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