Forecasting house-price growth in the Euro area with dynamic model averaging

• We use a dynamic modeling and selection approach for forecasting European house-price growth.
• The approach accounts for model and parameter uncertainty.
• We find superior performance compared to various alternative forecasting models, particularly after the recent financial crisis.

We use a dynamic modeling and selection approach for studying the informational content of various macroeconomic, monetary, and demographic fundamentals for forecasting house-price growth in the six largest countries of the European Monetary Union. The approach accounts for model uncertainty and model instability. We find superior performance compared to various alternative forecasting models. Plots of cumulative forecast errors visualize the superior performance of our approach, particularly after the recent financial crisis.