In uncertain economies, some will win, while others will lose.
The agents who consistently use uncertainty metrics to evaluate their markets? They're going to outperform those flying blind, no matter how many years of experience or market share the other guy's accumulated.
What separates those who thrive from those who barely survive comes down to one thing: how you respond when market psychology starts shifting beneath your feet.
The moment indicators begin signaling that economic uncertainty exists in the marketplace, clients' anxiety spikes fast, and deals you thought were rock-solid can suddenly fall apart.
Economic uncertainty isn't only about market risk
Most people treat economic uncertainty like it's just market risk wearing a different hat.
But here's what I've learned: economic uncertainty is fundamentally about unpredictability, that is, the degree to which we can actually forecast what's coming next.
Back in 2015, Jurado, Ludvigson, and Ng nailed something important when they argued that
"it is not whether a particular set of economic indicators has become more or less variable…that matters, but rather the degree to which the economy has become more or less predictable."
That distinction changes everything about how we evaluate and act in uncertain markets.
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What is an economic uncertainty index?
An economic uncertainty index acts as a real-time thermometer for market uncertainty. It's hunting for signals about how unpredictable things have become out there.
What I find powerful about these indices is how they transform those vague feelings of concern we all get into measurable numbers we can actually track and use.
4 powerful methods for measuring economic uncertainty
There are four methods that cut through the noise:
News coverage as sentiment indicators of the marketplace. The Economic Policy Uncertainty Index, created by economists, counts news articles containing the words 'economy', 'policy', and 'uncertainty.' What we got instead of lagging data was a near-real-time measurement of marketplace sentiment, often showing up before any actual change hits the housing market.
Pattern recognition through historical data analysis. Analysts dig through past data—GDP growth, inflation rates, employment statistics—hunting for patterns and possible triggers of housing market shifts. The data they're reviewing connects directly to your clients' purchasing power and how confident they feel about investing.
Market Fear Index and Lending Impacts. The Market Volatility Index (VIX), known as the 'fear index,' measures what market participants expect for future volatility. When the VIX climbs, mortgage rates become less predictable, which hits your clients' ability to borrow and afford homes.
Forecasting consumer sentiment based on surveys. Surveys of businesses and consumers provide qualitative evidence about how people feel and what they expect from future economic conditions. These surveys often reveal your clients' buying intentions before those intentions show up as actual activity in the housing market.
To me, economic uncertainty represents both a challenge and an opportunity. Using these indexes lets you spot shifts before they ripple through the housing market.
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Aaron Franklin
Head of Growth
Aaron "Kiwi" Franklin is the Head of Growth at Ylopo and a serial technologist and entrepreneur who has over 25 years of experience creating digital solutions for major brands and pioneering companies where technology and real estate meet. His depth of expertise stems from leading development of the first website for Apple to founding a global community of over 1,000 elite athletes.