Analysis of the real estate market in Las Vegas: Bubble, seasonal patterns, and prediction of the CSW indexes

Details Analysis of the real estate market in Las Vegas: Bubble, seasonal patterns, and prediction of the CSW indexes Analysis of the real estate market in Las Vegas: Bubble, seasonal patterns, and prediction of the CSW indexes

2007-04-04

arxiv.org/abs/0704.0589v1

Physica A 387 (1), 243-260 (2008)

Economy

Quantitative Finance

General Finance

24 Elsart pages including 13 pages and 1 table

Scientific paper

10.1016/j.physa.2007.08.059

We analyze 27 house price indexes of Las Vegas from Jun. 1983 to Mar. 2005, corresponding to 27 different zip codes. These analyses confirm the existence of a real-estate bubble, defined as a price acceleration faster than exponential, which is found however to be confined to a rather limited time interval in the recent past from approximately 2003 to mid-2004 and has progressively transformed into a more normal growth rate comparable to pre-bubble levels in 2005. There has been no bubble till 2002 except for a medium-sized surge in 1990. In addition, we have identified a strong yearly periodicity which provides a good potential for fine-tuned prediction from month to month. A monthly monitoring using a model that we have developed could confirm, by testing the intra-year structure, if indeed the market has returned to ``normal'' or if more turbulence is expected ahead. We predict the evolution of the indexes one year ahead, which is validated with new data up to Sep. 2006. The present analysis demonstrates the existence of very significant variations at the local scale, in the sense that the bubble in Las Vegas seems to have preceded the more global USA bubble and has ended approximately two years earlier (mid 2004 for Las Vegas compared with mid-2006 for the whole of the USA).

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