| Title |
Real estate market stability: evaluation of the metropolitan areas by using factor analysis and z-scores / |
| Authors |
Grybauskas, Andrius ; Pilinkiene, Vaida |
| DOI |
10.5755/j01.ee.29.2.19380 |
| Full Text |
|
| Is Part of |
Inžinerinė ekonomika = Engineering economics.. Kaunas : KTU. 2018, vol. 29, iss. 2, p. 158-167.. ISSN 1392-2785. eISSN 2029-5839 |
| Keywords [eng] |
factor analysis ; indicator ; price bubble ; real estate ; stability ; sustainable growth ; z-scores |
| Abstract [eng] |
This article is a modern approach to analysing the real estate market stability in today’s era. Many statistical methods were used to measure price deviations, nonetheless, they were insufficient to identify the economic collapse in 2008. As sustainable growth in the real estate sector has become a major priority, some alternative measures to analyse market deviations should be developed. Most recent studies showed that home prices in San Francisco, New York, Vancouver and other cities are soaring up to new unprecedented historic heights. The issue on whether this price growth is another bubble risk factor remains debatable since more scientific evidence needs to be presented. Therefore, this paper develops a new “bubble” index which provides additional insights in the current market situation from a broader perspective. The empirical research, which was conducted on four different metropolitan areas worldwide, which demonstrated an outstanding home price growth over the period 2008 to 2016. By applying factor and z-score analysis to seven different sub-indexes and aggregating them all into one, this paper developed the methodological framework that allowed to assess whether there is an under/over value situation in the real estate market. The research results have confirmed that 4 metropolitan areas (San Francisco, Vancouver, London and Sydney) are indeed in the bubble risk zones, which can lead to a market correction or even a new recession. The research suggests that although it is difficult to compare model accuracies, employment of factor analysis and z-score methods provides strong predictability capacity since it perfectly mimics the prior economic crisis and leads to the results somewhat similar to those obtained by employing the UBS bubble index. |
| Published |
Kaunas : KTU |
| Type |
Journal article |
| Language |
English |
| Publication date |
2018 |
| CC license |
|
