Some Definitions and/or Differences of Terms used in HousingAlerts
Inflation Adjusted Annual Home Price Appreciation %
- This is the key metric we use for most TA because it strips out inflation. We do this to measure the true Supply & Demand forces.
- One way to think about this is if you were on a diet and weighed yourself every day - but sometimes you were wearing full winter coat and boots, sometimes in your underwear, and other times wearing who knows what.
It is like all that clothing - it masks what is really going on with your weight. Inflation is like that for housing... it masks what's really happening.
Annual Home Price Appreciation
- This is Inflation Adjusted Annual Home Price Appreciation % plus inflation. It's what is normally quoted in the media.
Quarterly Home Price Appreciation (annualized %)
- This is the change in home prices from 3 months earlier and then annualized (i.e. - multiplied four) to get an annual equivalent appreciation rate.
- Quarterly comparisons have more 'noise' in them, and will tend to bounce around a lot more than annual comparisons. However, quarterly data can also spot market reversals and changes quicker because it only looks back 3 months, instead of a year.
Inflation Adjusted Home Price Index
- An 'index" is an easy way to compare different markets over time (i.e. - cumulatively, rather than annually or quarterly) RELATIVE to each other. An index takes a year (any year) and assigns a value to home prices for that year (say '100'). That's called the 'base year.' Then - for any other year, home prices can be expressed in terms relative to that 'base year' index value. So, when comparing say Detroit and San Francisco (which have very different home prices), the index simply compares the relative change each market has experienced.
- Index values are also helpful in showing CUMULATIVE changes in home values and include the 'compound effect' over many years.
Inflation Adjusted Quarterly Home Price Appreciation (%)
- This is same as Quarterly Home Price Appreciation (annualized %) except that it excludes the effects of general inflation.
Raw Home Price Index
- This is same as Inflation Adjusted Annual Home Price Appreciation % except that it includes the effects of general inflation (purchasing power).
CAGR (Compound Annual Growth Rate)
- CAGR is a useful measure to discover if there are any zip codes that consistently looked RELATIVELY better than other nearby zip codes over the past few years
(Note: It only takes a few seconds to check CAGR so we recommend looking at even longer CAGR’s as well).
The 2/3-year CAGR should ‘smooth out” some of the wild swings in data – giving you a better indication of the true RELATIVE performance of the micro market (and whether or not it’s an area worthy of your investment). This link explains it in further detail: https://knowledgebase.housingalerts.com/article/260-micro-market-maps-users-guide
This gauge ranks all markets based on its ‘raw’ Total Home Appreciation Rate over the previous year. ‘THAR’ scores are ‘spot’ indicators that should be used with TAPS and Master Scores, not as stand-alone decision triggers.
This gauge ranks all markets based on its ‘raw’ Total Home Appreciation Rate over the previous four years. ‘THAR’ scores are ‘spot’ indicators that should be used with TAPS and Master Scores, not as stand-alone decision triggers.