Monday, November 12, 2007

Calculate Your (Paper) Housing Wealth!


In an effort to make the most out of the S&P/Case-Shiller indices and the implications of the futures contracts that trade in concert with them, I have created the Home Value Calculator Tool which calculates your home’s value history based on a few simple pieces of criteria.

Plug in your purchase date, the price you paid and the market that your home is located in and…

POOF!

Out comes the complete history of your home’s value and, for some markets, predictions for its value in the future.

Of course, you should view this data as a rough estimate although, for my last home, the results are spot on.

The tool uses the CSI and daily settled futures data in order to formulate your home’s value history and additionally provides results in both “nominal” (i.e. non-inflation adjusted) and inflation adjusted terms.

For more information on the technicals of the underlying home prices indices, read my prior posts on the subject and check out the S&P/Case-Shiller/Futures Tool.

As usual, let me know what you think and of course, if you should notice any bugs!

19 comments:

  1. Los Angeles is broken.

    Yes, both the market and your market calculator. ;-)

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  2. Rob,

    How so? I just tried it out and it looks ok...

    Can you specify the parameters you used?

    Thanks,
    Sold

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  3. Peter T4:53 PM

    The idea is great; small housing markets are unfortunately not covered by the CSI.

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  4. peter,

    You can use the "national" region for your calculation but I agree, this data is most relevant for the covered metro areas...

    I may expand to tool to use the OFHEO HPI data in the future... this would get you exactly what your looking for but the quality of the data is not quite as good.

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  5. I used my own. 7/1/1995 Los Angeles 220000.

    I tried Firefox and Safari. Both returned National triples but nothing but gray lines for Los Angeles. I did resets and re-entries. I think it is a bug.

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  6. Vicki Lloyd7:53 PM

    I checked a few properties that I knew the values for and it came out fairly close. One was for a home I bought in 1993 for $270K, then sold in 2003 for $549K, and think it is probably worth $750-$775 today. The graph put it at $805K today, which is a little too high, but it showed $548K for the time that I sold it for $549K. I used the Los Angeles area, although it was in Orange County.

    I also did one in San Diego, and it tracked within about 5% of reality over an 8 year holding period.

    Good job! It's much closer than Zillow!

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  7. Vicki,

    Thanks for the encouraging words... I may have some updates in the future that even make it more accurate.

    Rob,

    Yes you found a bug... but it should be good now. Thanks for reporting it.

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  8. Its giving results thats are way too high.

    I entered my area, and a guy down the street who has his place for sale, and what he paid in 2004.

    It came back him having an 80k gain in value, but in reality he is selling it for 20k less than he paid, and there are no takers.

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  9. Doug,

    Can you specify the data you are using and I can take a look...

    Thanks in advance...

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  10. Can you specify the parameters I tried it it is ok

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  11. SoldAtThePeak11:58 PM

    OMG.

    I put in my place, and the price we paid.

    It spit out the exact price we sold it for in 2005 within one hundred dollars.

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  12. Sold,

    Excellent...

    Sold

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  13. Just read a great post from a San Diego real estate broker on appraisals that I believe is effecting all bubble markets.

    You can view it at:
    http://www.brokerforyou.com/brokerforyou

    it is titled: Is Your San Diego Home Appraisal Really Accurate? and was posted on 9-29-07.

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  14. Sure,

    Washington DC area, price paid in June 2004 489k, - Current price on the market 475k with no takers.

    It came back 565k or something outrageous like that.

    Some homes that were bigger, had 100k more options and additional bedrooms sold this year for 530k.

    It should have come back 425-450k IMO, at best.

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  15. Doug,

    I checked out the tool with your data..

    Keep in mind that between 2004 and 2005, Washington DC saw tremendous appreciation... prices were literally rocketing up (look at the chart the tool generates)...

    The S&P/Case-Shiller data is formulated from real sale prices associated to deed transactions and the latest data only covers up to early August closings... so it will take some time for the index to average down to meet the exact state of the market you are now witnessing...

    Also notice that prices have been dropping precipitously since the nominal peak during June 2006.

    I think in your case, the volatility of the prices in your market is accounting for the error.

    Keep checking back... we will be getting the new Case-Shiller data for September in just a couple of weeks and the result may seem more accurate then.

    ALSO!... pay attention to the futures as this will give you a bit more visibility into current and future prices...

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  16. Anonymous12:55 PM

    does you inflation adjustment take into account that the dollar is falling?

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  17. anon,

    No.

    I simply deflate the nominal dollar values using the CPI-less shelter.

    To do what you suggest, you would need to express the values in terms of another currency or gold.

    It's not a bad idea actually... I may just add that.

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  18. Anonymous1:11 PM

    Makes no sense. A house purchased for $202,000 in 1977 in Westchester County, NY is now worth $527K according to your calculation I don't think so. Present value is $987,000.
    I don't get it.

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  19. Anonymous9:42 PM

    The calculation for past and current price is probably sensible, but not for future price. It appears that you're viewing the price of futures with further-out expiration dates as a leading indicator of the current price. I don't believe that's an accurate method. There are a number of factors affecting further-out expirations, and these are really not predictive. If you could truly predict markets from that, you could make loads of money in any market with an associated futures market, but it really isn't that simple.

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