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.

- This is Inflation Adjusted Annual Home Price Appreciation % plus inflation. It's what is normally quoted in the media.

- 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.

- 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.

- This is same as Quarterly Home Price Appreciation (annualized %) except that it excludes the effects of general inflation.

- This is same as Inflation Adjusted Annual Home Price Appreciation % except that it includes the effects of general inflation (purchasing power).

- This is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.

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