Lead indicators of residential market price changes : An empirical study

Purpose: This paper empirically demonstrates that lag time to first bid (LT) and amount of first bid (DBid1) for open market property transactions are indicators to predict house price volatility. LT is advocated as an alternative measure to time on the market (TOM) and provides early signalling to vendor and agent of SP-LP.

Methodology: The dataset contains 3124 detailed transaction histories for properties sold in Belfast between 2002-2009 characterising a period of rapid price growth (2005-2007) followed by a period of sharp decline (2008-2009). The dataset facilitates the investigation of housing market dynamics through examining trends of actual bidding histories using regression modelling. The effects of vendor and bidder behaviour in a rising and a falling market on sales price relative to list price are analysed.

Findings: Results from regression analysis indicate LT as a statistically significant variable for predicting SP-LP offering a similar r2 to TOM model, combining DBid1 increases r2. LT provides an early indicator of market perception and conveys market intelligence that can inform price expectations and probability of sale. Furthermore, survival analysis demonstrates LT is a useful predictor of the probability of a sale achieving SP>LP.

Originality: The dataset includes detailed transaction histories for residential property covering phases of a house price cycle including new variables of LT and DBid1 to enhance our understanding of the sales process through the use of microvariables which capture purchaser behaviour.