Mong

How Far Will House Prices Fall? Implications From the Latest WSJ Survey

I have a question and some comment/questions :

1. The question : Given all reader's comments, in particular Alec's, are median home prices some function of 5 times of 1/3rd disposable monthly income currently?

2. The comment (with some questions too). This pertains to the equation. (It is only noted the Menzie's equation "predicts" how Case Shiller will move in relation to OFHEO data. The equation does not itself predict how house prices will move. Alec, please note : You and Menzie are not talking about exactly the same thing, hence your's and Menzie's methodologies are not substitutes for each other, even tho both methods apparently end up upon the same figure of around 40-50% )

(a) perhaps you could remove the negative intercept, which is although statistically significant @10% level, has a strange interpretation, namely that changes in case shiller are negative for 0 changes in OFHEO data.

A side effect of this is to bring up the estimates for Case Shiller.

b. With reference to the histograms, are expectations too *positive*? How accurate have these expectations proven to be?


c. Have the equation coefficients proven robust? What is the range of coefficients on a say 5 year (20 Q-s) rolling basis?