Summary of Constructing the Home Purchase Sentiment Index

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Constructing the Home Purchase Sentiment Index summary
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Rating

8 Overall

8 Importance

9 Innovation

7 Style

Recommendation

Interest in understanding the dynamics of the housing market and the sector’s relationship to the broader economy has grown since the 2008 financial crisis. In this brief overview, Professor James A. Wilcox introduces a Home Purchase Sentiment Index that can provide enhanced forecasts of the US housing market’s direction. getAbstract recommends this informative report on a new economic tool to policy experts, financial executives and anyone watching the US residential real estate market. 

In this summary, you will learn

  • What the Home Purchase Sentiment Index (HPSI) measures;
  • How it performs, compared to other metrics, in forecasting the housing market; and
  • Why more experience with the HPSI will hone its predictive ability. 
 

About the Author

James A. Wilcox is a professor at the University of California, Berkeley. 

 

Summary

The Great Recession focused attention on the fact that the US housing sector has a big impact on the economy, employment and the financial industry. Thus, a sector-specific index of factors that shape people’s decisions about housing could be useful in forecasting the future of the housing market. The Home Purchase Sentiment Index (HPSI) is a new tool that draws on Fannie Mae’s monthly National Housing Survey, which asks some 100 questions of a sample of 1,000 US consumers. The HPSI includes questions that elicit six central behavioral influences in people’s choices about housing:

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