zipanalyser

Leading Economic Indicators

Zip Analyser’s Real Estate Forecasts and Financial Modeling was derived at through extensive mathematical testing and Sensitivity Analysis. A sensitivity analysis determines how different values of an independent variable affect a particular dependent variable (in this case Future Value of a property) under a given set of assumptions…

By testing each variable in the dataset, we were able to determine which Leading Economic Indicators have a consistent influence on risk and future price changes, resulting in the 11 key variables used in our forecast model.

Our List of Leading Economic Indicators and Leading Demographic Indicators and definitions

  1. Affordability Growth – that takes into account existing home prices, new home prices, and automatic valuation models compared to the median income in the selected boundary level.
  2. Disposable Income Growth – A Leading Economic Indicator and the amount of money that a household has available for spending and saving after income taxes. Disposable personal income is a key leading economic indicators used to gauge the overall state of any given market.
  3. Gross Domestic Product (GDP) Growth – is the total growth in monetary value of everything produced by all the people and companies with the selected local growth market. It is a broad measurement of the local market and overall economic health and activity.
  4. New Job Growth – is a core leading economic indicator, but must take into account income growth as well. Investments are riskier when job growth and incomes are falling, less risky when they are both strong.
  5. Labor Force Growth – is recalculated monthly for most local markets, is a key component of two commonly used employment calculations created by the BLS; the labor force participation rate and the unemployment rate.
  6. Median Income Growth – is the amount, which divides the income distribution into two equal groups like half, having incomes above the median and half has incomes below the median. Median income is a core leading economic indicator.
  7. Net Worth Growth – is defined as assets minus liabilities. It is a concept applicable to individuals and a key measure of how much a household is worth. A consistent increase in net worth indicates good financial health.
  8. New Business Growth – is based upon the number of new businesses entering a new market/area. Typically this indicator is a good leading indicator of overall growth.
  9. Population Growth – or the lack of it – has a strong effect on local demand for housing. Investments with strong population and income growth are usually less risky and the combination usually leads to very high growth.
  10. Unemployment Rate Growth – is a closely watched statistic because a rising rate is seen as a sign of a weakening economy that may call for a cut in interest rate. Similarly, a falling rate indicates a growing economy, which is usually accompanied by a higher inflation rate and may call for an increase in interest rates.
  11. Vacancy Rate Growth – is useful metrics for evaluating a rental property. High vacancy rates indicate that the local real estate market is not renting well, on the other hand, low vacancy rates point to strong rental sales.

We combine these core 11 variables every month/quarter to get our 12, 24, and 36 Month Forecasts that have a back-tested to 98.1% accuracy.  With accurate local forecasts, and leading economic indicators, Realtors and investors can limit their risk by assessing the latest growth and forecasts, both locally and regionally.

BENEFITS:

  • Dynamically spot cool and hotspot segments within any market.
  • Make smarter real estate investments and greater profits
  • Eliminate the guess work and manual labor to accurately determine current and future residential and commercial real estate price values
  • Current hyper-local market data not out-of-date market forecasts and stale reports to predict market trends to give the investor a competitive advantage
  • Discover your true risk and expected ROI, instead of simple single variable linear trends
  • Capture the biggest gains in the shortest time by discovering hot local spots in order to get higher ROI in any market. 

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