Overview
Housing prices are tied to the broader economy. When unemployment rises or inflation shifts, housing tends to follow. I wanted to measure how strong that relationship actually is.
I estimated the effect of the unemployment rate and Consumer Price Index on the House Price Index using OLS regression on annual U.S. data from 1975 to 1994 (sourced from FRED via Kaggle). As a learning exercise, I also computed the coefficients manually using the normal equation to verify the library output.
Higher unemployment pulls housing prices down, and higher CPI pushes them up. The model explains 99.7% of the variation in house prices (R² = 0.997), and both effects are statistically significant (p < 0.001). I also looked at mortgage rates and disposable income, but neither was significant in this dataset.