FORECASTING THE REAL ESTATE MARKET: A COINTEGRATED APPROACH
Research has shown that a decline in residential investments signals an impending decline in economic activity. Sources of demand for both residential and commercial real estate sectors are similar and this should move the markets in the same direction over the long-run. Since the residential market has already collapsed, the study of real estate investments is important. This paper utilizes real estate and macroeconomic data to forecast investment loans. Cointegration methods are used for the forecast because the data displays a tendency to move together. The results show that the forecast is inconsistent with the positive relationship between both real estate markets; the residential market will continue to decline, whereas the commercial market with see a positive growth from 2011-2012.