The economic recession felt in the United States since the collapse of the housing market in 2007 can be seen by various trends in the housing market. This collapse claimed some of the largest financial institutions in the U.S. such as Bear Sterns and Lehman Brothers, as they held over-leveraged positions in the mortgage backed securities market. Credit became widely available to unqualified borrowers during the nineties and the early part of the next decade which caused bankers to act predatorily in their lending practices, as they could easily sell and package subprime mortgage loans on leverage. This act caused a bubble that would later …show more content…
We are going to use two separate periods in our analysis. The first period that we are going to use is our historical data from January 1975 through August 2011. The last six months of model from September 2011 through February 2012 is our hold out model in which we test the forecasted NHS results against the actual NHS during the same span of time to test the accuracy of the models forecast’s.
We will use ForecastX software to run the models in an attempt to determine which model is the most accurate and thus should be used to forecast NHS to obtain the clearest picture of the future direction of the market. The two error measurements we will use to determine accuracy are mean absolute percentage error (MAPE) and root mean square error (RMSE). To obtain MAPE, we first divide the forecast error or error (actual value – forecast value) by the actual