Correlation Analysis of Housing Prices and Economic Indicators

In the recent years, complex systems research has included economy as a complex web of human interactions, and exciting progress has been made in connecting economy to biological, cognitive and behavioral sciences. Certain tools of statistical physics can be used in the area of complex systems which certainly includes economics. This work deals with the effects of economic indicators on house prices in eighteen countries, mostly in the western world. The economic indicators utilized in this study are gross domestic product, population, Consumer Price Index and Retail Price Index. By using a clustering algorithm, changes in house prices in different countries are used to categorize these countries. These results are then used to investigate the possible house price bubbles in these countries.