Leading indicators for the real estate economy
Real estate markets, construction activity, macroeconomy, commodity prices
Real estate markets are similar to other markets and the economy in general in that they undergo cycles. These cycles are irregular in terms of their length and amplitude, however. It is always a challenge for institutional investors to align their real estate investments to new market developments. The search for, negotiation, approval and execution of transactions lead to considerable delays along the time line. The market data received on a particular day is based on decisions which have generally been taken months beforehand – and in the case of some construction projects many years ago.
With this information basis markettrends are often identified too late to bring about effective and efficient reactions. As real estate markets do not exist in splendid isolation from the general economic environment, leading indicators elsewhere in the economy can possibly be useful, however. This study is dedicated to the search for corresponding parameters which correlate with the real estate market and precede it where possible, therefore. Thus a number of leading indicators with striking correlations can be identified, which when taken alone do not allow for reliable conclusions to be drawn, but taken as a whole could serve as early indicators for possible developments on the real estate markets.