Real Estate and the Age of Big Data

Join the Fool for a talk with Chris Mayer, who is the Paul Milstein Professor of Real Estate and Finance and Economics at Columbia Business School. Mayer is also a visiting scholar at the Federal Reserve Bank of New York, and the co-director of the Richard Paul Richman Center for Business, Law, and Public Policy. His research has delved into topics such as housing cycles, mortgage markets, debt securitization, and commercial real estate valuation.

With the plethora of real estate metrics and indexes available today, Mayer discusses how he sifts out the signal from the noise, and which information he thinks is important.

Full transcript below.

David Hanson: Stepping back and just looking at the broader housing market, there's a lot of metrics that come out. We have housing starts, applications, mortgage rates.

Chris Mayer: Yeah, I get calls almost every other day. Some new statistics come out. It's like, "Do you think this is a really big deal?" Sort of like weekly unemployment claims, they bounce around a lot. Who knows?

Hanson: Is there one that's more important than any other, or are they all kind of just noise, and the long-term trend is really the story?

Mayer: I think the monthly data still have an element of noise to them. Case and Shiller has reported that the seasonality doesn't work so well in their indexes. Zillow I think also has very good indexes that -- if you ask me what do I use in my research -- they have very good data that I use a lot, and I don't have any shares in Zillow, for full disclosure.

But I think, in general, it's the putting together all the pieces. If you were asking me, what do I think is going to be a really important issue for housing, it's household formation. We've seen household formation levels that are at ... I don't want to say all-time lows, but incredibly low levels.

Even coming out of the recession, people are living at home, doubling up, tripling up. People are getting married later, having kids later, all this kind of stuff. That's really the demand side of the equation for housing.

I still am a straight fundamentals kind of guy, and I worry a lot about that. I do look at the composition of who's buying. If you see a lot of cash purchases, that tells you something, because ultimately housing has to be occupied, and you have to work your way through that picture.

Obviously, prices and percentage of people underwater also matters. Those are some of the things that I look at, and of course housing starts.

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