Is a derivative security for hedging in the housing market:
The RPX, or Residential Price Index, is a derivative security traded on the market to allow those involved in the residential housing industry to hedge their home price-sensitive exposure. In other words, the shares of this index can be purchased if one thinks home prices will increase in the short term, causing negative influence on your business. Your increase in share value can decrease or offset the negatives from increased prices.
Is the only index out there for residential home prices reported daily:
The other two highly followed residential home price indexes are:
- Case-Shiller® Home Price Index - reported monthly; and
- OFHEO Home Price Index - reported quarterly.
Tracks 25 statistical areas and develops a composite:
The RDX Residential Price Index tracks 25 MSA's, or Metropolitan Statistical Areas from around the country. Individual index numbers are available for each, as well as a U.S. Composite number for the whole country that is derived from the MSA's.
Uses price per square foot instead of gross sale prices:
The RPX Residential Price Index is also unique in that it uses prices per square foot for its calculations, instead of gross sales prices of homes. Radar Logic Corporation purchases public record data from municipal offices, recorders' offices, assessors and building departments.
Where possible, they use the "living area square feet" as designated in the locality. The square footage is the most recent on record, so some inaccuracies may occur due to recent additions, etc.
Calculates from a given day, prices that are for 1 day, 7 day and 28 days back:
The 7 day and 28 day prices are not moving averages. In other words, the 7 day value for a given day would use that day plus the data from the previous six calendar days and aggregate it into one number.
The transaction date used is ideally the "sale date", defined as the transfer date as written in the text of the deed. However, in cases where this isn't accurate, the recording date is used.
Selects residential transactions by structure and transaction type:
The RPX uses the following criteria for selection of transactions to be included in the home price index:
- Uses single family residences, condominiums, duplex, triplex, quadplex and apartment units;
- Uses both resale and new construction home prices; and
- Excludes those that appear to be construction loans or transactions between family members or other non-arm's-length transactions.
Is a lot more detailed than can be described here:
There are a great many other factors that determine whether a transaction will be selected for the index or not. For much more detail of the methodology used by the RPX, use these links:
Provides the daily index numbers here:
Radar Logic, Inc. provides the RPX Daily Home Price Index numbers in Acrobat.pdf format here.
