Early warning indicator systems for real estate investments: Empirical evidence and some thoughts from the perspective of financial risk management

  • Miguel Rodriguez GonzalezEmail author
  • Tobias Basse
  • Frederik Kunze
  • Günter Vornholz


In recent years, early warning indicators and real estate—as an increasingly relevant asset class—have received more and more attention in German insurers’ investment strategies. Therefore, this paper examines the relationship of real estate sentiment data as leading indicators for housing activity and house price indices. However, we focus on empirical evidence from the US due to the quite limited data availability in Germany. The National Association of Home Builders (NAHB) housing market index is used as an indicator for US real estate prices and other variables related to housing activity and the S&P/Case-Shiller 20 city home price index for house prices in the US. In order to test for Granger causality among US house prices and the NAHB sentiment indictor we employ a modified Wald test based on Toda and Yamamoto (1995) examining an augmented vector autoregressive (VAR) model in levels. The results of our empirical investigations do show that there are clear signs for unidirectional Granger causality running from the NAHB housing market index to the S&P/Case-Shiller index. Therefore, the NAHB data seem to be quite helpful predicting US house prices. This empirical finding is of high relevance with regard to the construction of early warning indicator systems for real estate prices.


Frühwarnindikatoren und Immobilien — als zunehmend relevantere Anlageklasse — haben in den letzten Jahren immer mehr Beachtung in den Anlagestrategien deutscher Versicherer gefunden. Daher untersucht dieser Artikel die Beziehung zwischen Immobilienmarktstimmungsdaten als Frühindikator für Immobilienaktivität und Immobilienpreisindizes. Aufgrund der eingeschränkten Datenverfügbarkeit in Deutschland beschränkt sich diese Analyse dabei auf eine empirische Untersuchung der USA: Der Immobilienmarktindex der National Association of Home Builders (NAHB) wird als Indikator für US-Immobilienpreise und andere mit der Wohnaktivität zusammenhängende Variablen verwendet, sowie der S&P/Case-Shiller Home Price Index für Preisentwicklungen am US-Immobilienmarkt. Um die Granger-Kausalität zwischen den US-amerikanischen Hauspreisen und dem NAHB-Sentimentindikator zu testen, verwenden wir einen modifizierten Wald-Test, basierend auf Toda und Yamamoto (1995), und untersuchen ein erweitertes vektorautoregressives Modell (VAR) in Levels. Die Ergebnisse unserer empirischen Untersuchungen finden eindeutige Hinweise auf unidirektional verlaufende Granger-Kausalität vom NAHB-Immobilienmarktindex zum S&P/Case-Shiller-Index. Daher scheinen die NAHB-Daten bei der Vorhersage der US-Immobilienpreise recht hilfreich zu sein. Diese empirische Feststellung ist somit für die Konstruktion von Frühwarnindikatorsystemen für Immobilienpreise von großer Bedeutung.


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Copyright information

© Springer-Verlag GmbH Deutschland, ein Teil von Springer Nature 2019

Authors and Affiliations

  1. 1.Insitute for Risk & InsuranceGottfried Wilhelm Leibniz UniversityHannoverGermany
  2. 2.Norddeutsche Landesbank GirozentraleHannoverGermany
  3. 3.Touro College BerlinBerlinGermany
  4. 4.Deutsche HypothekenbankHannoverGermany
  5. 5.EBZ Business SchoolBochumGermany

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