Abstract
The conventional statistical measure of housing risk is standard deviation of year-over-year percentage changes in price. This definition facilitates quantification of risk and its statistical description, although it does not fully capture the wide range of downside risks that homeowners, their lenders, and other interrelated sectors of the economy face when housing prices fall sharply (e.g., banks, pension funds holding mortgage-backed securities, and local governments whose tax base is tied to housing prices). This article provides examples of the conventional quantification of housing risk based on standard deviation, its limitations, and some alternative measures that focus on downside risk rather than symmetric fluctuation about the mean.