| Bankruptcy as Predictor |
| Written by Bill Russell | |
| 06.22.2007 | |
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Discuss this article on the forums. (0 posts) To further explore the question of what factors create a hot housing market, I went back to the full set of economic variables we have at Housing Intelligence. Out of 40 variables, the single best predictor of home appreciation, with an R-squared of .265, is the growth of the bankruptcy rate (bankruptcies per household). The more bankruptcies declined, the more homes appreciated.  This high level of correlation for the bankruptcy rate is probably because it makes a unique proxy for the overall state of a market. Markets with low and decreasing levels of bankruptcy are those that have experienced sustained job and income growth. Those markets with high levels of bankruptcy are the ones where job and income growth are low or non-existent, leading to less housing activity. 
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