Wednesday, August 29, 2007

How is the long run trend calculated?

How is the long run trend calculated?
In each of the real estate markets examined so far, the long run linear trend is estimated using price data from 1978 quarter 1 to 2000 quarter 4. This trend is then projected forward for the period 2001 quarter 1 to 2005 quarter 3. The estimated value for 2005 quarter 4 is then subtracted from the actual price in 2005 quarter 3. This gives the percentage over-valuation in each market.

The data comes from the OFHEO, who provide price indices for a typical small family home.

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