According to recent housing sector data, the nationwide house price forecast points to steady growth, with median prices expected to hit $410,000 by year-end The average cost of a home climbed 0.5% month-on-month, according to Nationwide's latest house price index, released on Wednesday. This was more than the consensus forecast of a 0.2% monthly increase, according to Capital Economics. To assess model performance, I construct an out-of-sample forecast at each point of time using only data up to that time, starting with 2020. The results of this exercise are shown in Figure 4. This is obviously an exceptionally hard period to forecast, as many shocks — unemployment, supply chain, fiscal and monetary — hit the economy throughout this period. However, the forecasts detect the turning points and trends well, despite being parsimonious. In this respect, the forecasting model is a substantial success. Investor briefings cite the updated house price forecast as evidence for stable long-term returns, with a projected 3.8% uplift over six months. Analysts recommend watch lists include real estate-linked dividend stocks.
