Are Real House Prices Likely to Decline by 47 Percent?

20 Pages Posted: 28 Dec 2006 Last revised: 12 Aug 2010

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Date Written: October 1991

Abstract

Mankiw and Weil have estimated a demographically-driven real house price equation on annual data from the 1947-87 period and used it to forecast real house prices over the 1988-2007 period. The result is their infamous 47 percent real decline. Their equation really only fits data from the 1950s and 1960s. Not only is the post 1970 fit poor, but the cumulative in-sample forecast for the 1970-87 period is off by a factor of four. While real house prices seem more likely to decline than increase over the next two decades, the most likely decline is 10 to 15 percent, not 47 percent.

Suggested Citation

Hendershott, Patric H., Are Real House Prices Likely to Decline by 47 Percent? (October 1991). NBER Working Paper No. w3880, Available at SSRN: https://ssrn.com/abstract=473996

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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