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The Efficiency of the Market for Single-Family Homes
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1988
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The authors test market efficiency using repeat sales data from 39,210 homes across Atlanta, Chicago, Dallas, and San Francisco/Oakland between 1970 and 1986. The study finds that single‑family home prices are not efficient, with persistent year‑to‑year price movements, failure to reflect real interest rates, and a profitable timing rule, yet overall price changes remain poorly forecastable. © 1989 American Economic Association.
Tests of the efficiency of single family home prices are performed using repeat sales prices of 39,210 individual homes in Atlanta, Chicago, Dallas, and San Francisco/Oakland for 1970-86. The market does not appear to be efficient. Year-to-year changes in prices tend to be followed by changes in the same direction in the subsequent year. Moreover, information about real interest rates does not appear to be incorporated in prices. There is, thus, a profitable trading rule for persons who are free to time the purchase of their homes. Still, overall, individual housing price changes are not very forecastable. Copyright 1989 by American Economic Association.