Sunday, November 04, 2007

Housing Price Correction Calculator

by Calculated Risk on 11/04/2007 11:12:00 AM

From Kevin at the Baltimore Housing bubble:

This months edition of Fortune Magazine (November 12, 2007) had a great article on housing called How Low Can They Go? by Shawn Tully (no online link available yet, but I’ll modify post once it is). It combined extensive analysis of 54 metro housing markets with the combined work of Moody’s Economy.com, Fortune Analysts, PPR, & NAR. The basis of the article was to provide a snapshot of what the future of housing will look like in 5 years from June 2007. They determined a correction value (sometimes positive) by comparing present day price to rent ratios with the average of the past 15 years.
Kevin has developed a spread sheet (download here) based on the numbers for all 54 metro housing markets from the Fortune article.
Instructions on how to use the calculator are in the file and you will be able to modify to be bullish or bearish on how the next 5 years play out.
Here is Kevin's post: Price Correction Calculator. He would appreciate any feedback. Enjoy.