Posts Tagged ‘ Case-Shiller ’

Case-Shiller Shows Home Values Rolling Back 9 Years

June 3, 2011
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Case-Shiller Annual Change March 2011

The March Case-Shiller Index was released this week and it corroborates the findings of the government’s most recent Home Price Index — home values are slipping nationwide.

According to the Case-Shiller Index’s publisher, Standard & Poors, home values fell in March from the year prior.

The March report was among the worst Case-Shiller Index readings in 3 years. On a monthly basis, 18 of 20 tracked markets worsened. Only Seattle and Washington, D.C. showed improvement, rising 0.1% and 1.1%, respectively.

On an annual basis, price degradation was even worse.

Washington, D.C. is the only tracked market to post higher home values for March 2011 as compared to March 2010. The national index has now dropped to mid-2002 levels.

As a buyer in today’s market, though, you can’t take the Case-Shiller Index at face value. It’s methodology is far too flawed to be the “final word” in home prices.

The first big Case-Shiller Index flaw is its relatively small sample size. S&P positions the Case-Shiller Index as a national index but its data comes from just 20 cities total. And they’re not the 20 most populous cities, either. Notably missing from the Case-Shiller Index list are Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10).

Minneapolis (#48) and Tampa (#55) are included, by contrast.

A second Case-Shiller flaw is how it measures a change in home price. Because the index throws out all sales except for “repeat sales” of the same home, the Case-Shiller Index fails to capture the “complete” U.S. market. It also specifically excludes condominiums and multi-family homes.

In some cities — such as Chicago — homes of these types can represent a large percentage of the market.

And, lastly, a third Case-Shiller Index flaw is that it’s on a 2-month delay. It’s June and we’re only now getting home data from March. Today’s market is similar — but not the same — to what buyers and sellers faced in March. The Case-Shiller Index is far less useful than real-time data of a city or neighborhood.

The Case-Shiller Index is more useful to economists and policy-makers than to everyday buyers and sellers in Lacey. For better real estate data for your particular neighborhood, ask your real estate agent for help.

A real estate agent can tell you which homes have sold in the last 7 days, and at what prices. The Case-Shiller Index cannot.

The Home Price Index Shows Flat For November

January 26, 2011
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Home Price Index from peak to presentHome values were reported unchanged in November 2010, on average, according to the Federal Home Finance Agency’s Home Price Index. 

We say “on average” because the government’s Home Price Index is a data composite for the country. The index doesn’t measure citywide changes in places like Lacey , nor does it get granular down to the neighborhood level to measure places like Pierce County.

Instead, the Home Price Index groups state data in 9 regions with each regions having as few as 4 states in it, and as many as 8.

Not surprisingly, each of the regions posted different price change figures for the period of October-to-November 2010.

A sampling includes:

  • Values in the Pacific region rose +1.2%
  • Values in the New England region rose +0.3%
  • Values in the Mountain region fell -1.9%

The complete regional list is available at the FHFA website.

That said, none of these numbers are particularly helpful to today’s home buyers and sellers and that’s because everyday people don’t buy and sell homes on the Regional Level. We do it locally and the government’s Home Price Index can’t capture data at that level.

It’s a similar reason to why the Case-Shiller Index is irrelevant to buyers and sellers.

November’s Case-Shiller Index showed home values down 1 percent in November, but that conclusion is a composite of just 20 cities nationwide — and they’re not even the 20 largest cities. Philadelphia, Houston and San Jose are conspicuously absent from the Case-Shiller list.

So why are reports like the Home Price and the Case-Shiller Index even published at all? Because, as national indicators, they help governments make policy, businesses make decisions, and banks make guidelines. Entities like that are national and require data that describe the economy as a whole. Home buyers and sellers, by contrast, need it locally.

Since peaking in April 2007, the Home Price Index is off 14.9 percent.

Home Values Rose In November 2009 By Another 0.7 Percent

January 29, 2010
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Home Price Index April 2007 to November 2009

Reporting on a two-month lag, the government said home values rose 0.7 percent in November. 

National home prices are at their highest point since February 2009.

But before we look too much into the FHFA’s Home Price Index, it’s important that we’re cognizant of its shortcomings; the most important of which is its lack of real-time reporting.

According to the National Association of Realtors™, 80% of purchases close within 60 days. As a result, because of its two-month delay, the Home Price Index report actually trails today’s market data by an entire sales cycle.

This is one reason why home values appear to be rising even while new data shows that both Existing Home Sales and New Home Sales fell flat last month.  The home valuation report is using data from November; the sales reports are using data from December.

The Home Price Index is a trailing indicator and next month, as the Spring Market gets underway, the government will be reporting data from the holidays.

The same is true for the Case-Shiller Index. It, too, operates on a 2-month lag.

All of that said, however, long-term trends do matter in housing and the Home Price Index has shown consistent improvement over the last 10 months.  In many markets, home sales are up, home supplies are down, and values have increased.  This trend should continue into the early part of 2010, at least.

If you’re wondering whether now is a good time to buy a home in Olympia , consider low prices, cheap mortgages and an available tax credit as three good incentives.  By May, none of them will likely be available.