`LAXOMETER' HITS HOME; HOUSING COST FORECAST USES TRAVELER NUMBERS.

Byline: Gregory J. Wilcox Daily News Staff Writer

Craig M. Silvers, real estate research director at Los Angeles-based Sutro & Co., takes a simple approach to forecasting whether area home prices will go up or down: He counts heads.

Every one of the tens of millions of people who pass through Los Angeles International Airport terminals each year go into Silvers' equations. Then Silvers crunches the numbers, applies a little forward spin and has come up with a surprisingly accurate prediction of home price movement.

Silvers, also a senior vice president at the well-respected investment bank, christened the airport crystal ball method his ``LAXometer.''

Given the size and type of his database, it's safe to say the method has some legs under it.

``I had seen the passenger traffic statistics come out and sensed a strong correlation of different factors with each other. Some of them had an unusually high coincidence correlation. There's a regression formula that worked very well,'' the economist said.

Translated into layman's terms: A sort of random statistic popped up, he applied it to home prices and found that they were a shirttail cousin to the annual change in the number of folks coming and going through LAX.

Shoot, it almost sounds like the title to a new country song: ``My home price would rise if I could get my wife to take off.''

Here's the basics. Silvers looked at the percent change in passenger traffic on an annual basis and found that home prices in the six-county Southern California region moved in the same general direction two years later.

Thus it's a leading indicator.

For example, in 1995 passenger traffic increased 5.6 percent and in 1997 the median home price, the point at which half sold for more and half for less, increased 5.1 percent.

Silvers said that his LAXometer predicted both the decline and rise of home prices during the 1990s.

Last year was the first time he brought it into play and forecast a 9.9 rise in home prices after passenger traffic increased 7.5 percent in 1996. Turned out that prices during 1998 actually rose 9.8 percent, according to Silvers' calculation.

Some other real estate market analysts said that predictions like Silvers' aren't just flights of fancy.

John Karevoll at Acxiom Corp.'s DataQuick Products Division said that with today's computing power all sorts of quirky relationships can be uncovered.

``There are a number of trends that seem to dance to the same tune and it's not normally apparent why they do that,'' he said. ``There are always some number patterns that seem to behave similarly.''

In Silvers' case, he said the airport traffic patterns belie four hard economic facts.

Passenger traffic increases when people are confident about the economy. Those living in the region either fly out on vacations or businesspeople fly into town for the same reasons.

In times of economic distress, just the reverse is true.

For example, during the recession in the early part of the 1990s, both passenger traffic and housing prices were depressed.

``The bigger the swing in passenger traffic the bigger the swing in housing prices,'' Silvers said.

No doubt last year was a banner year for homeowners who finally scored some appreciation. So what about this year?

Based on 1997's 5.6 percent increase in passenger traffic Silvers predicts home prices this year will see a modest gain of 3.5 percent.

CAPTION(S):

Chart

CHART: LAXOMETER

The number of people passing through Los Angeles International Airport can be a harbinger of housing prices. A Sutro & Co. method looks at the change in traffic one year to predict housing price changes two years later.

Source: Sutro & Co.