Project Proposal – Group 5

The US real estate market is a very interesting market to investigate, not only because of its
magnitude – in 2019 alone, the value of new private residential buildings put in place was
514.6 Billion USD – but also because of its significant impact in the world economy, as it has
significantly contributed to the financial crisis of 2008.1 Nowadays, as in 2008, the US
housing market is said to be at risk once again, this time influenced by the crisis of our times,
the coronavirus pandemic.2 Therefore our research will provide insights for real estate firms
that will have difficulties staying afloat, since even their survival through the pandemic is not
certain. The forecast will enable companies to plan the workforce and CAPEX investments
accordingly to the market situation.

In this final project, historical data of the US housing market will be collected and analysed,
in order to determine the economic indicators that best predict the sales of new homes in the
United States. These indicators may include GDP growth rate, unemployment level and
interest rate. After the best indicators have been narrowed down, they will be used to create
two separate forecasts. The first forecast will use the best predictor to estimate sales number
for a three-year period, without taking into account the pandemic situation. The second one
will use the best predictor as well, but in order to construct the economic model this time, data
from the post-2008 financial crisis recovery period will be used, paired with some
macroeconomic prognoses (provided by external sources), in order to provide a more accurate
depiction of what the post-covid sales of new homes in the US market will look like. The
second approach will be more experimental and based on the assumption that post-covid
recovery will have similar characteristics to the 2008 crisis. This is a very tentative
assumption as the current crisis is more significant and its roots are not based on the subprime
crisis. However, for the recovery period some characteristics may be similar, for example in
both cases FED decided for a huge monetary stimulus which will probably drive inflation rate
up and therefore may make real estate an attractive investment to save wealth from inflation.

All in all, the second forecast will try to model the future on many assumptions that will be
necessary in this very uncertain future.

1
https://www.statista.com/topics/1618/residential-housing-in-the-us/
2
https://www.forbes.com/sites/amydobson/2020/04/28/these-us-housing-markets-are-the-most-at-risk-from-
covid-19/#181afce04187