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Key drivers forecasting US Housing

Forecasting the US housing market requires analyzing a blend of factors: Economic indicators like interest rates, employment levels, and overall economic health play a pivotal role, as do demographic shifts including population growth and urbanization trends. Policy decisions, encompassing government housing initiatives, zoning laws, and monetary policy, significantly influence market dynamics.

< 1 mins

Time taken to
identify most
relevant indicators

21+

Relevant
leading
indicators

80%

MAPE
forecast
accuracy

*Indicio captures the group effect of the leading indicators, the relevance ranking of each indicator changes over time.

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Here are the leading indicators identified using Indicio:

Main variable:
United States, New Home Sales, Total, AR, SA

Indicator name	Influence


United States, Construction Spending, Total, Current Prices, AR, SA, USD	⭐⭐⭐⭐
Consumer Price Index for All Urban Consumers: All Items in U.S. City Average, SA	⭐⭐⭐
CBOE Volatility Index: VIX	⭐⭐
New Privately-Owned Housing Units Started: Single-Family Units, SAAR	⭐
United States, Building Permits, Total	⭐
United States, New Home Sales, For Sale at the End of Period, Total	⭐
Google trends: House price index, US	⭐
United States, New Home Sales, Total	⭐
New Privately-Owned Housing Units Under Construction: Total Units, SA	⭐
New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units, SAAR	⭐
United States, Building Permits, Total, AR, SA	⭐
Monthly Supply of New Houses in the United States, SA	⭐
United States, Pending Home Sales, United States, AR, SA, Index	⭐
NASDAQ Composite Index	⭐
United States, Business Surveys, National Association of Home Builders, National Association of Home Builders / Wells Fargo	⭐
United States, Investment Account, Change in Private Inventories, Overall, Total, Constant Prices, AR, SA, USD, 2012 Chained Pr	⭐
United States, Existing-Home Sales, Single-Family and Condos, Total, AR, SA	⭐
Google trends: house for sale, US	⭐
United States, Housing Starts, Total, AR, SA	⭐

Top indicators identified

United States, Construction Spending, Total, Current Prices, AR, SA, USD

This variable represents the total construction spending in the United States, measured in current prices and expressed in U.S. dollars. The data is seasonally adjusted (SA) and presented as an annual rate (AR), reflecting the value of construction work done over a given period.

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Consumer Price Index for All Urban Consumers: All Items in U.S. City Average, SA

CPI measures the average change in prices over time. This index reflects the overall cost of living and is seasonally adjusted (SA) to account for predictable fluctuations, providing a clearer view of underlying inflation trends. The CPI-U is widely used as an economic indicator to gauge inflation and adjust income payments, such as Social Security.

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CBOE Volatility Index: VIX

The CBOE Volatility Index (VIX) is a real-time market index that represents the market's expectations for volatility over the coming 30 days. Often called the "fear gauge," the VIX is calculated using the prices of S&P 500 index options and reflects investor sentiment. A higher VIX indicates higher expected volatility, while a lower VIX suggests calmer market conditions.

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How Skanska gained the ability to continuously evaluate its forecast accuracy and enhance forecast performance

Challenge

The objective was to increase forecast accuracy through a standardized and data-driven process without expanding the team of analysts. They were also invested in identify new market drivers in the housing market.

Solution

This has lead to increased forecast accuracy, deeper understanding of the market dynamics and higher work-load capacity within the analytics team. It has also supported the management team in prioritizing amongst potential projects whilst lowering risk for the ones selected to start.

The access to advanced predictive models has deepened the understanding of the price dynamics of the market. This is attributed to Indicio recommending the best suited models and indicators.

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