A mathematical formula can track housing bubbles by comparing the same home's price over decades
Economists developed a repeat-sales methodology that tracks the value of the same home over decades, allowing them to strip away market noise and identify dangerous housing bubbles before they burst.
The S&P/Case-Shiller Home Price Index revolutionized real estate by comparing the sale prices of the exact same properties over long periods. Developed by economists Karl Case and Robert Shiller, this method eliminates the distortion caused by different home sizes or features, focusing purely on market value fluctuations. This mathematical approach proved vital in 2006 when it revealed national prices were 89 percent above historical trends.
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