Wealthfront projects the value of your property into the future based on a capital markets model.
The empirical foundation of the model is that the returns on real estate reflect the compensation investors require for bearing systematic risk in the real estate market (risk factor). Wealthfront uses historical data to estimate the dynamical relationship between real estate returns in metropolitan statistical areas (MSAs) in the United States and returns on a national real estate price index, as well as, to estimate the dynamic evolution of returns on the national real estate price index. If your property is located in one of the MSAs covered by the S&P CoreLogic Case-Shiller Home Price Indices, then Wealthfront’s model assumes changes in residential prices as measured by the Case-Shiller index for your MSA perfectly track changes in the value of your property. If your property is not located in one of the MSAs covered by the Case-Shiller Indices, then Wealthfront’s model assumes changes in residential prices as measured by the National Case-Shiller Index track changes in the value of your property. Wealthfront’s model assumes that investors require no compensation to bear risks on the value of real estate, and the model does not take into account rental income, maintenance costs, or the impact of homeownership on clients savings all of which may impact total returns on real estate investment. These projections do not take into consideration other reasons for appreciation or depreciation that are more specific to your property, such as changes in the desirability of your neighborhood, home improvement investments, or general wear and tear.
For more details on our methodology, please log into your account and review the Path disclosures.