August 12, 2007

Resale Formula Comparison Tool

Click here to launch the application

This general purpose educational tool was designed to help community leaders understand the relative performance of different limited equity resale formulas. So much of what sets one model apart from the other is dependant on the assumptions you make about interest rates, home price inflation and income growth. This tool allows a side-by-side comparison between several models, and allows you to change these input assumptions and immediately see changes in the relative performance of each of the models in terms of both ongoing affordability and equity building for homeowners. The tool also allows you to look up historical data on home prices and median incomes for every metropolitan area in the country in order to get a better feel for what appropriate assumptions might be going forward.

The tool compares several of the most common resale formulas including a basic AMI index, an appraisal based formula, a mortgage based formula and a shared equity loan model.

The tool is intended to help policy makers to evaluate questions like:
· When housing costs are rising rapidly, which approach preserves affordability best?
· Which approach provides the greatest asset building opportunity in the face of rising interest rates?
· If incomes grow more slowly than we expect, which approaches will be most impacted?

You can make the analysis more relevant to your local conditions by customizing a number of background assumptions like cost of production for a new affordable unit, the level of subsidy available, and the monthly housing costs that homeowners will face.

Posted by Rick Jacobus at August 12, 2007 03:31 PM

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