The Factors Which Caused the Decline in the Amount of the Newly One Family Houses Sold in US

The new privately owned one-family house sold (C25) is recognized as great indicator for economy. The monthly data in February 2011 was 250,000 houses sold. Compared to five years ago, 1,061,000 in 2006 were decreased by 76%. What are the causes to the dramatic decline of number of C25? The purpose of this paper is to analyze factors that determine the decline of number of C25 in US. Therefore, in this study, dependent variable is the new privately owned one-family house sold. Independent variables include 30 years mortgage rate, real personal income, unemployment rate, population, and house price index. The results indicate when the interest rate increases 1%, the number of new privately owned one-family houses sold decreases by 20 thousand. When the unemployment rate increases 1%, the number of new privately owned one-family houses sold decreases 81 thousand, holding all other variables constant. We thought when price goes up the demand should go down. But it doesn’t fit in this study. Income and house sold have positive relationship but it’s not significant. It shows that real personal income and unemployment have a high correlation. For the population variable, the coefficient is a negative number. Even though the p-value indicates that this result is not significant, we still couldn’t figure out the cause of this negative relation. The result of monthly dummy test indicates that none of the months has significant effects. However, from March to July the slopes of the months have positive or lower negative effects. Consequently, it’s impossible to determine all the causes to the number of new house sold since many factors are interrelated. However, through our series of statistical tests, we could be able to conclude that current mortgage rate is significant at 1% level; mortgage rate at lag one time period is significant at 5% level; both real personal incomes at lag one time period and unemployment rate at lag two time period are significant at 10% level. Keywords: house sold, mortgage rate, income level, unemployment rate, population increases, house price index