Case Shiller: Here Are The 15 Housing Markets That Will Fall The Most By 2012
Reprinted with permission of Michael Lissack email@example.com (239) 254-9648
It seems the media does not take the time to explain what Case-Shiller is and how it is to be understood.
Lets start at the beginning:
Further it looks at the median transaction number. Medians are the point where 50% of the data is higher and 50% is lower. The Case-Shiller Index correctly notes that the median transaction value has dropped.
The Index is NOT the FORECAST. The Forecast looks at the trends in the Index value and then adjusts for the ratio of median prices to median reported incomes. It then further adjusts for unemployment and demographics. Again the Forecast is not about anything other than medians. What the decline in the forecast median tells us is NOT that values will collapse but rather that builders will perceive a demand for homes in the $100k to $250k segment and will build those homes. The greater the number of such homes built and sold the lower the median price (since the median is where 50% of the sales are above and 50% are below).
This version of the Forecast is dead on target. Numerous builders (DR Horton, Lennar, Pulte, GL Homes, WCI) have announced projects in the $100k to $250k price range. The builders see what the forecasters see – increased demand at the low end.
The forecast says NOTHING about individual home values.
But that would not be a sexy media story.
The model identifies long-term influences on house prices, such as income trends and demographics, and cyclical factors such as unemployment and changes in mortgage rates.
Analysis and forecasts are based on a fully specified supply-and-demand model.
Forecasts for baseline and alternative econoconditions.mic scenarios. Forecasts house prices under stressed economic
In addition to the baseline forecast (the most likely economic scenario), Moody's Analytics forecasts the CSIs under alternative economic scenarios. Understanding the future path of house prices in relation to economic stresses such as oil price shocks, financial market distress, dollar devaluation, and others is critical to successful strategic planning and risk management.
The county house price forecasts are driven by county data on median household income, the unemployment rate, mortgage interest rates, population growth, and metro area or state house price trends. Moody's Analytics currently forecasts the aggregate index for 367 counties, updated monthly.
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