College of Charleston develops more specific housing index
2009/04/14, 12:25 pm
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The College of Charleston has found a new way to estimate Charleston area home values, which could help the local business community figure out how severely the recession has put a damper on local real estate prices.

The College of Charleston Home Value Index, which will be unveiled tonight, is meant to provide an objective look at how home prices fluctuate from month to month throughout the region, said Tim Allen, director of the college’s Carter Real Estate Center.

Allen, who hopes to start forecasting home prices by June, plans to release the monthly home price index on the same day that the Charleston Trident Association of Realtors releases its statistics. He’ll also release quarterly estimates of home values by region.

“This home value index provides a more statistically rigorous set of home value trends than what’s currently available,” he said.

The local real estate association releases the median sales price for all homes that sold during a given month, creating a trend line for home values. But that method doesn’t take into account the fact that each pool of sold homes has different characteristics.

“The median prices (methodology) ignores the fact that different homes sell from period to period,” Allen said.

Other groups have developed alternative ways to measure housing values. The Case-Shiller index, for example, is best known for its monthly report on how national housing prices change in the top 20 metropolitan areas.

The Federal Housing Finance Agency, which owns mortgage insurance giants Freddie Mac and Fannie Mae, also keeps a price index based on the purchase price of homes that were guaranteed by the two groups.

Allen’s model is different.

For every month starting in 1989, he plugged in information about every Charleston-area home sale, including its price and 60 factors — from the number of bedrooms to ceiling height to location. His program then gives a value to each of those features.

So based on the batches of data entered into the system, Allen will ask for the price of an imaginary home that has specific features. The price of that fictitious home pulled each month generates the housing price index’s trend line.

The housing index isn’t meant for homeowners who want to figure out their own property’s worth, Allen said. Instead, it’s supposed to help consumers understand the latest market trends and provide more data to the business community.

“If it helps somebody make a better decision, I’m fine with that,” said Gettys Glaze, an agent with Coldwell Banker United who also is president of the Realtors association’s Multiple Listing Service. “The consumer needs to be educated on what’s going on so sellers can price their homes correctly and we can get some inventory off the market.”


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