Actuarial Values of Housing Markets

This paper discusses a methodology of calculating actuarial housing values, with the goal of helping mortgage lenders to gauge departures of housing market values from the fundamentals, and assisting policymakers with tools for implementing counter-cyclical policies. The methodology calculates actuarial values by employing a control mechanism on the metro level housing price index so that it doesn’t deviate too high or too low from the fundamentals. The control mechanism is achieved by incorporating macro, micro, and metro-specific data on the economic and demographic factors that affect supply and demand.