This study quantifies the extent to which apartment prices in Korea deviate from their long-run equilibrium, and empirically examines the role of market sentiment in explaining such deviations. Using monthly data from 2016 to 2024 and a vector error correction model, the results showed that apartment prices repeatedly deviate from equilibrium, with the overshooting index reaching its peak of 0.76 in June 2021. A comparative analysis of sentiment indicators showed that online real estate sentiment index (RSI)-based measures are positively associated with apartment price indices, whereas conventional survey-based sentiment indices display strong contemporaneous co- movements with price changes. This suggests that the two groups of sentiment indicators capture different market information dimensions. Granger causality tests indicated that the RSI has significant predictive power for the apartment price index at a lag of two to four months. Random forest and shapley additive explanations (SHAP) analyses further identified sentiment variables as major explanatory factors associated with price deviations. Overall, the findings suggested that interest rates, financial conditions, or lending regulations cannot fully explain overshooting in the Korean apartment market. Rather, RSI serves as a useful supplementary indicator for monitoring apartment price overshoots and interpreting changes in market regimes.
Park et al. (Wed,) studied this question.