Predicting economic growth: evidence from real-estate loans securitization

This paper examines the role of housing in predicting macroeconomic outcomes. We do so by incorporating real-estate loans securitization, an important housing-related variable, in our investigation. Our in-and out-of-sample results show that (1) securitized real-estate loans contain leading information about the real economy after accounting for other predictors such as residential investment; (2) securitized real-estate loans significantly improve corporate bond credit spreads’ ability to forecast economic indicators; (3) while house prices lead the economy, after accounting for securitized real-estate loans and residential investment, the predictability appears to be more about economic contractions than expansions; (4) shocks to securitized real-estate loans have sustained economically significant effects on economic growth.