House price forecasting with neural networks

• Published in: Intelligent systems with applications Vol. 12; p. 200052
• Main Authors: Xu, Xiaojie, Zhang, Yun
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.11.2021; Elsevier
• Subjects: Forecasting; House price; Neural network; House price; Forecasting; Neural network
• DOI: 10.1016/j.iswa.2021.200052
• ISSN: 2667-3053

•We develop neural network models for house price forecasting in China.•We explore the forecasting issue for 100 major Chinese cities.•We construct simple, accurate, and stable models.•The models are useful as technical tools and for policy analysis. The house market has been rapidly growing for the past decade in China, making price forecasting an important issue to the people and policy makers. We approach this problem by exploring neural networks for forecasting of house prices from one hundred major cities for the period of June 2010–May 2019, serving as the first study with such wide coverage for the emerging Chinese market through a machine learning technique. We aim at constructing simple and accurate neural networks as a contribution to pure technical forecasting of house prices. To facilitate the analysis, we investigate different model settings over the algorithm (the Levenberg-Marquardt, scaled conjugate gradient, and Bayesian regularization), delay (from two to six), hidden neuron (two, three, five, and eight), and data spitting ratio (70%–15%–15%, 60%–20%–20%, and 80%–10%–10% for trainingvalidationtesting), and arrive at a rather simple neural network with only four delays and three hidden neurons that leads to stable performance of 1% average relative root mean square error across the one hundred cities for the training, validation, and testing phases. We demonstrate the usefulness of the machine learning approach to the house price forecasting problem in the Chinese market. Our results could be used on a standalone basis or combined with fundamental forecasting in forming perspectives of house price trends and conducting policy analysis. Our empirical framework should not be difficult to deploy, which is an important consideration to many decision makers, and has potential to be generalized for house price forecasting of other cities in China.