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.