Home Equity Protection Plan

How do we derive a property value?

Since properties are not sold often, IRESE derives an observed value of a property at any given time based on a change of publicly available price indexes.

Depending on data availability, the following publicly available price indexes may be used: Federal Housing Finance Agency Home Price Index (HPI), which is published by US government every quarter here. Note, we are using All-Transactions Indexes (Estimated using Sales Prices and Appraisal Data) data.

We provide tools to Research House Price Indexes.

By combing the weighted average of publicly available index data one can find out the value of any given property at any given time by applying index change data to the last recorded sale price and sale date for the property. IRESE uses publicly available index data to establish an observed property value.

For example, let us walk through deriving the value of the property located on 1501 Front Street Unit 426, San Diego, CA 92101 on March 1, 2008. Based on a publicly available data from the San Diego County, this property’s last recorded sale was on 08/09/2005 for $391,990.

Now, let’s review publicly available price index changes for this specific property:

HPI Price index change is -5.807%, derived from the observed index of 314.99 points on 8/9/2005 and 297.22 points on 03/1/2008 and by calculating the percent change with a derived price of $369,228, i.e. Derived Property Value = $391,990 * (-5.807) / 100 = $369,228.

At any time the property value needs to be established, the value of the property is derived based on the last recorded sale price adjusted by the formula described above. The base property value establishes a starting point. Going forward, the derived property value cannot be manipulated as it is always derived based on publicly available index data compiled by the government and independent 3rd parties.

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