Tag Archives: index

Now we have the Home Buyer Index

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NBC, with the help of experts, developed a new index to summarize the ease or difficulty of buying a home in many counties in the United States. It produces a number between 0 (easy to buy) and 100 (hard to buy) and consists of four factors:

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  • Cost: How much a home costs relative to incomes and inflation — as well as how related expenses, such as insurance costs, are changing. 
  • Competition: How many people are vying for a home — and how aggressive the demand is. This is measured through observations including the percentage of homes sold above list price and the number that went under contract within two weeks of being listed. 
  • Scarcity: The number of homes that are on the market — and how many more are expected to enter the market in the coming month.
  • Economic instability: Market volatility, unemployment and interest rates — reflecting the broader climate in which home shoppers are weighing their decisions. 

The value of an index is that it attempts to incorporate a lot of data into a single number. Given the current real estate market in many places, having this single number could help express what home buyers can expect or are experiencing.

At the same time, this seems like the product of a particular moment. Home buyers perceive a tighter market than they might like. This index confirms it. The index goes back to 2012 with the data available: it was quite a bit lower ten years ago in 2014 and it really ticked up in late 2021.

Two additional questions:

  1. How many potential home buyers would act differently based on this index? Will this encourage people to not try so hard to purchase a home?
  2. Does this score mean it is a great time to be a home seller? Is the home seller index roughly the inverse of the index for home buyers?

Google measures inflation by looking at web data

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Once again drawing upon its access to  information, Google suggests it developing an alternative measure of inflation:

Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics.

The work by Google’s chief economist, Hal Varian, highlights how economic data can be gathered far more rapidly using online sources. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks…

The GPI shows a “pretty good correlation” with the CPI for goods such as cameras and watches that are often sold on the web, but less so for others, such as car parts, that are infrequently traded online.

This bears watching as Google can access data and then analyze/summarize it at a much quicker speed than the government. But it will be interesting to see how Google gets around the issue of what is being sold online – the story also notes that Google’s index downplays the role of housing.

This could play out in a number of ways. Could this online index be improved so that markets were responding to Google’s data rather than the government’s data? Let’s say the government decides it likes Google’s approach. Does it develop the same or a similar algorithm within the government? Does it contract the task to Google?