As most Forex market traders utilize fundamental analysis to plan their market strategies, the news of a newly developed housing index is making waves in the industry. Up until now, the most common housing index used by Forex traders to predict future currency movement was the S&P/Case-Stiller home price index. This index tracks price change movements in the housing market in 20 different metropolitan regions throughout the country. It measures average price changes on re-sold properties in those designated indexed areas. The indices are published on a monthly basis with a two-month lag. The new housing index (the IAS360), developed by a Denver based company, takes a broader (and different) view of price changes in the U.S. market.
The IAS360 in detail
The IAS360 housing index addresses some of the inherent weaknesses of the commonly used S&P/Case-Stiller home price index. This new index analyzes housing trend changes on a deeper, wider level (360 counties, with 30 reported indices). This broader picture of reality is especially helpful in a time of a downturn since it can give indications of counter movements in emerging markets. For instance, by utilizing the IAS360 housing index, certain markets that would not have been analyzed by other indices such as the S&P/Case-Stiller index, could show actual growth. That in turn could be the fore bringer for renewed growth in the overall market, which might have been missed by a more limited housing index indicator.
The median sales price
The IAS360 index analyzes data based upon the median sales price, whereas other indices analyze data based on average sales prices. The median sales price method (takes the middle price between the highest and lowest prices) paints a more realistic picture than the average sales price method since it's not skewed towards the highest or lowest priced homes.
Timely reporting is crucial in determining trends and knowing when to invest in the markets. As opposed to the two-month lag in reporting with the S&P/Case-Stiller index (i.e. May figures come out in the last week of July), IAS360 numbers are published with only about a month's lag time (i.e. May figures are released in early July). With timelier reporting, the investor can make a better-informed trade decision.
by Harman Gilly