Forecasting Home Sales in the Four Census Regions and the Aggregate US Economy Using Singular Spectrum Analysis

Authors: Hassani, H., Ghodsi, Z., Gupta, R. and Segnon, M.

Journal: Computational Economics

Volume: 49

Issue: 1

Pages: 83-97

eISSN: 1572-9974

ISSN: 0927-7099

DOI: 10.1007/s10614-015-9548-x

Abstract:

Accurate forecasts of home sales can provide valuable information for not only, policy makers, but also financial institutions and real estate professionals. Given this, our analysis compares the ability of two different versions of singular spectrum analysis (SSA) methods, namely recurrent SSA (RSSA) and vector SSA (VSSA), in univariate (UV) and multivariate (MV) frameworks, in forecasting seasonally unadjusted home sales for the aggregate US economy and its four census regions (Northeast, Midwest, South and West). We compare the performance of the SSA-based models with classical and Bayesian variants of the autoregressive (AR) and vector AR models. Using an out-of-sample period of 1979:8–2014:6, given an in-sample period of 1973:1–1979:7, we find that the UVVSSA is the best performing model for the aggregate US home sales, while the MV versions of the RSSA is the outright favorite in forecasting home sales for all the four census regions. Our results highlight the superiority of the nonparametric approach of the SSA, which in turn, allows us to handle any statistical process: linear or nonlinear, stationary or non-stationary, Gaussian or non-Gaussian.

Source: Scopus