PREDICTING THE HOUSING MARKETWITH BUYER & SELLER PSYCHOLOGYPREDICTIVE ANALYTICS INNOVATION SUMMIT      Scott Sambucci, Mar...
WHO, WHAT, WHERE, WHEN, WHY & HOW• Altos Research• Real-time housing market analytics• 200+ metros, 20,000 zip codes• Not ...
TODAY’S ACTIVE MARKET SIGNALS FUTURETRANSACTION PRICES           Home listed             $429,000                         ...
APPLICATIONS OF REAL-TIME ANALYTICS• Current Market Conditions & Property Valuation  Changes• Future Housing Market Prices...
3507ARCLIGHTCOURT,FT MYERS, FL
3507 ARCLIGHT COURT, FORT MYERS, FL
SELLER RESPONSE TO MARKET DEMAND:LISTING PRICE HISTORY - 3204 TRAWLER PLACE
MIAMI CONDOS: MARKET IMPROVED IN 2009?                                  Did values really                                 ...
DEVELOPING A FORWARD VALUATION MODEL™:ENSEMBLE OF REGRESSION TREES WITH VARIABLEIMPORTANCE • Non-parametric    • Capture n...
BENCHMARK MODEL RESULTS• Average change in median price over the period was -0.53%• Second pass, multivariate OLS regressi...
ALTOS LPI™ TIME-SERIES RESULTSOut-of-Sample-Out-of-Time results for Mesa, AZ:  0.0%             Change in Median Price (+3...
FVM™ IN-SAMPLE SCATTERPLOT   San Mateo, CA 94401 / Single-family-home / All Quartile / 6M   x-axis is +6M change in LPI, y...
FVM™ OUT-OF-SAMPLE SCATTERPLOT  San Mateo, CA 94401 / Single-family-home / All Quartile / 6M  x-axis is +6M change in LPI,...
POLICY IMPLICATIONS:2009-2010 FIRST-TIME HOMEBUYER TAX CREDIT
GAMBLING IN LAS VEGAS? SHOCKING…
DECLINING HOUSING DEMAND
MACROECONOMIC INFORMATION GAIN:CONSUMER SENTIMENT & HOUSING
CONSUMER CONFIDENCE & HOME PRICES: 2010
S&P 500 VS HOME PRICES JAN 2008 – NOV 2010                 S&P 500   Active Prices  1,500.00                              ...
S&P 500 VS. HOME PRICES: MOST RECENT 6 MONTHS
AFFORDABILITY MEASURES:                           “CAPITA PER INVENTORY”                                9/26/08$800,000   ...
AFFORDABILITY: CAPITA PER INVENTORY                                9/26/08$800,000                          y = 1642.x + 1...
CONTACTScott Sambucci, VP Market AnalyticsAltos Researchwww.altosresearch.com(415) 931-7942scott@altosresearch.comhttp://b...
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Predicting the Housing Market with Buyer & Seller Psychology (Predictive Analytics Summit 2011)

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Presented by Scott Sambucci (Altos Research) at the IE Group’s Predictive Analytics Summit, "Predicting the Housing Market with Buyer & Seller Psychology" reviews real-time and leading indicators to predict future home prices.

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Predicting the Housing Market with Buyer & Seller Psychology (Predictive Analytics Summit 2011)

  1. 1. PREDICTING THE HOUSING MARKETWITH BUYER & SELLER PSYCHOLOGYPREDICTIVE ANALYTICS INNOVATION SUMMIT Scott Sambucci, Market Analytics Altos Research February 2011 | San Diego, CA
  2. 2. WHO, WHAT, WHERE, WHEN, WHY & HOW• Altos Research• Real-time housing market analytics• 200+ metros, 20,000 zip codes• Not what happened but what is happening & what will happen• Wisdom of crowds• Using Active Market to forecast future market activity
  3. 3. TODAY’S ACTIVE MARKET SIGNALS FUTURETRANSACTION PRICES Home listed $429,000 Buyer financing fails, Inventory 49 Neighbor home listed Property relisted $409,000 $394,000 Deal closed Price reduced $389,000 $398,000 Inventory 69 Offer made Transaction Recorded $391,000 March May July Sept Nov Jan Closed transaction = 1 data point, months too late Active Market = 9 months of pricing, price changes, supply and demand, leading indicators
  4. 4. APPLICATIONS OF REAL-TIME ANALYTICS• Current Market Conditions & Property Valuation Changes• Future Housing Market Prices• Consumer Sentiment• Financial Market Movements• Housing Policy & Affordability Implications
  5. 5. 3507ARCLIGHTCOURT,FT MYERS, FL
  6. 6. 3507 ARCLIGHT COURT, FORT MYERS, FL
  7. 7. SELLER RESPONSE TO MARKET DEMAND:LISTING PRICE HISTORY - 3204 TRAWLER PLACE
  8. 8. MIAMI CONDOS: MARKET IMPROVED IN 2009? Did values really move higher when the actives knew the market was weak?
  9. 9. DEVELOPING A FORWARD VALUATION MODEL™:ENSEMBLE OF REGRESSION TREES WITH VARIABLEIMPORTANCE • Non-parametric • Capture non-linearity & variable interactions • Embarrassingly parallel • Train quickly using the cloud • Bootstrap holdouts • Use all of our data for training • Information gain feature selection • Most important active market statistics • How entropic is the distribution of the dependent variable with each variable, and then without? • Modified ARCH model – hybrid of transaction and active market prices
  10. 10. BENCHMARK MODEL RESULTS• Average change in median price over the period was -0.53%• Second pass, multivariate OLS regression. Model had R2 = 29.4%, and mean absolute error (MAE) = 0.60% • This error completely swamps the signal, but why?• Residuals (errors) show bias and extreme non-linearity: 3.0% 2.0% 1.0% 0.0% -1.0% -2.0%
  11. 11. ALTOS LPI™ TIME-SERIES RESULTSOut-of-Sample-Out-of-Time results for Mesa, AZ: 0.0% Change in Median Price (+3M) Forecast Change in LPI (+3M) -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% -14.0%
  12. 12. FVM™ IN-SAMPLE SCATTERPLOT San Mateo, CA 94401 / Single-family-home / All Quartile / 6M x-axis is +6M change in LPI, y-axis is forecast +6M change in LPI 8.0% 6.0% 4.0% 2.0% 0.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% -2.0% -4.0% -6.0% -8.0%
  13. 13. FVM™ OUT-OF-SAMPLE SCATTERPLOT San Mateo, CA 94401 / Single-family-home / All Quartile / 6M x-axis is +6M change in LPI, y-axis is forecast +6M change in LPI 8.0% 6.0% 4.0% 2.0% 0.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% -2.0% -4.0% -6.0% -8.0%
  14. 14. POLICY IMPLICATIONS:2009-2010 FIRST-TIME HOMEBUYER TAX CREDIT
  15. 15. GAMBLING IN LAS VEGAS? SHOCKING…
  16. 16. DECLINING HOUSING DEMAND
  17. 17. MACROECONOMIC INFORMATION GAIN:CONSUMER SENTIMENT & HOUSING
  18. 18. CONSUMER CONFIDENCE & HOME PRICES: 2010
  19. 19. S&P 500 VS HOME PRICES JAN 2008 – NOV 2010 S&P 500 Active Prices 1,500.00 $415,000 1,400.00 $405,000 1,300.00 $395,000 1,200.00 $385,000 1,100.00 $375,000 1,000.00 $365,000 900.00 $355,000 800.00 700.00 $345,000 600.00 $335,000 500.00 $325,000
  20. 20. S&P 500 VS. HOME PRICES: MOST RECENT 6 MONTHS
  21. 21. AFFORDABILITY MEASURES: “CAPITA PER INVENTORY” 9/26/08$800,000 y = 1642.x + 11598$700,000 R² = 0.684$600,000$500,000$400,000$300,000$200,000$100,000 $- - 50 100 150 200 250 300 350 400 450 2011-02-18 $800,000 y = 1408.x + 10122 $700,000 R² = 0.737 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- - 100 200 300 400 500 600
  22. 22. AFFORDABILITY: CAPITA PER INVENTORY 9/26/08$800,000 y = 1642.x + 11598 San Diego$700,000 R² = 0.684 New York$600,000 Miami$500,000 DC$400,000 Detroit$300,000$200,000 Cleveland$100,000 $- - 50 100 150 200 250 300 350 400 450 2011-02-18 $800,000 y = 1408.x + 10122 $700,000 R² = 0.737 $600,000 $500,000 New York; San Diego $400,000 Miami $300,000 DC $200,000 Cleveland $100,000 $- Detroit - 100 200 300 400 500 600
  23. 23. CONTACTScott Sambucci, VP Market AnalyticsAltos Researchwww.altosresearch.com(415) 931-7942scott@altosresearch.comhttp://blog.altosresearch.com@scottsambucci

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