Although there are many useful factors for deriving home prices, such as regional market conditions, pool of available buyers, access to easy loans (FHA), low interest rates, unemployment level, and new home construction, analysts opinions (qualitative analysis) vary widely with regard to home price values. Quantitative analysis takes over where qualitative analysis ends. The Current Housing Fear Index (HFI)* essentially uses statistics to cut through the noise and rhetoric in order to quantify the true median home price value given the shadow inventory of homes (Figure 1.1.) and government largess, e.g.., QE and Fed stimulus represented by the M3 (Figure 1.2.):

Figure 1.1. US Shadow Inventory 2006-2012

Figure 1.1. Courtesy of USAToday.com

Figure 1.2. M3 Money Supply

Figure 1.2. Courtesy of shadowstats.com)

In order to determine a fair value for the US median home, first the 2006 HFI is computed in equation 1.1.. Next the 2012 median home price is calculated in equation 1.2:

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-- Posted Thursday, 16 August 2012 | Digg This Article