Hot Market Index

By March 11, 2012 TERM
What is The Hot Market Index? - Real Estate Definition

What is The Gimme-shelter Hot Market Index?

The Gimme-shelter Hot Market Index† is a calculation that describes how much activity is happening in a given real estate market. It usually has a value anywhere from 30 to over 100.

Real Estate Agent Explains The Hot Market Index

I designed the Hot Market Index† to find out if I could predict when price increases would occur in the Edmonton real estate market. So far, it looks like the Index is pretty accurate, showing when prices are set to increase, and when they should soften and when they won’t likely move at all.

The Index uses a proprietary formula developed by me, based on the number of homes sold, the prices of those homes and a few other market metrics. The Hot Market Index is displayed in °G (degrees G for Gimme-shelter), because it is a measure of ‘hotness’. The higher the number, the hotter the housing market.

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The Hot Market Index has a temperature gauge:

  • 100 °G – Scorching
  • 90 °G – Blistering
  • 80 °G – Hot
  • 70 °G – Warm
  • 60 °G – Cool
  • 50 °G – Chilly
  • 40 °G – Cold
  • 30 °G – Freezing
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Any Hot Market Index value over 70 °G usually means prices are set to rise, but it’s the change in the Index that tells the biggest part of the story of how the market is doing. A big increase, or decrease means that prices will likely follow in that direction.

Here is an example of the Hot Market Index for 2007, based on total residential MLS sales:

A chart showing the Hot Market Index in Edmonton for 2007

A chart showing how the Hot Market Index changed in 2007

You can see when the Hot Market Index plummeted; that’s when the boom was over. Prices decreased soon after and the market has been cool ever since. At the peak, the Index was at a dizzying 106.6 °G in April of 2007, but started to cool abruptly afterwards. By September, the Index was at a frigid 40 °G – one of the coldest monthly Index values seen from 2005 all the way through 2011. It was a sign of things to come. Average residential prices dropped $12,000 the next month, and another $29,000 the month after. A massive 10% of the average price of homes.

Why Does It Matter?

Anything that can help predict a rise or fall in house prices is extremely useful. I feel that the Hot Market Index has so far been able to take into account the way buyers and sellers feel about a particular housing market.

Note: All date for the Hot Market Index provided by the MLS® system via the Realtors Association of Edmonton (formerly the Edmonton Real Estate Board)

†The Hot Market Index, Gimme-shelter Hot Market Index and ‘°G’ are trademarks of gimme-shelter.com

by +Alan F Macdonald REALTOR® | Copyright © – gimme-shelter.com

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Alan F Macdonald

Author Alan F Macdonald

Alan F Macdonald is a real estate agent with Maxwell Challenge Realty in Edmonton, Alberta.

More posts by Alan F Macdonald