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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (21651)	11/11/2004 2:11:32 PM
From: zebra4o1	Respond to of 110194

PMI's low risk index for Las Vegas I think the text below may explain why PMI considers Las Vegas to be a low risk area for a housing price drop. Their model is trend following. If prices went up a lot last year in an area, they assume further appreciation this year, and a low probability of a price drop. They do seem to have other components of the index that are based on fundamentals (an affordability index), but at least part of their index is based on a momentum trading mentality. This is pretty crazy if you are trying to detect a possible housing bubble - gives you exactly the wrong signal during a blow-off top. “Research indicates that house price growth is very persistent in the short run: A year of low Home Price Appreciation is likely followed by another year of low growth. Consequently, low or even negative Home Price Appreciation in the past year is a sign of impending trouble and consequently the model calculated Risk Index will vary inversely with last year’s Home Price Appreciation. “ pmigroup.com