The Federal Reserve Board has come up with a new way to analyze pricing trends. They are emulating the Case-Shiller Index, but applying it to the list prices of properties marked pending to predict the eventual sales prices:

Abstract: We construct a new “list-price index” that accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller. Our index is based on the repeat-sales approach but for recent months uses listings data, which are available essentially in real time, instead of transactions data, which become available with signiffcant lags. Our index methodology is motivated by a simple model of the home-selling problem that shows how listings variables such as the list price and marketing time help predict the final sales price. In a sample of three large MSAs over the years 2008-2012, our index (i) accurately forecasts the Case-Shiller index several months in advance, (ii) outperforms forecasting models that do not use listings data, and (iii) outperforms the market’s expectation as inferred from prices on Case-Shiller future contracts.

Full paper (761 KB PDF)

An ideal price predictor would combine these two trends:

SD list prices vs inventory

The lowest inventory seen was February, 2013, and no surprise that when combined with the lowest rates ever that the market reached full-frenzy mode.

They show now that San Diego inventory is about 13% higher than last February, and the list prices have been fairly flat for the last few months.  Because sellers want more than the last guy, sales prices should keep increasing, at least at a moderate rate.

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