Aug 1, 2012 | Housing Analysis
According to the S&P/Case-Shiller Index, home values rose 2.2% nationwide, with all 20 tracked markets making month-to-month improvement. On an annual basis, 17 of the 20 Case-Shiller Index markets improved.
Despite the positive report, however, our enthusiasm for the May Case-Shiller Index should be tempered. This is because the index’s methodology is less-than-ideal for today’s Massachusetts home buyer.
There are three main reasons why :
- The Case-Shiller Index tracks values for single-family homes only
- The Case-Shiller Index is distorted by distressed, discounted home sales
- The Case-Shiller Index publishes on a 2-month lag
Perhaps even more important, though, is that the Case-Shiller Index ignores a basic tenet of the housing market — all real estate is local. It’s not possible for 20 cities to represent the U.S. housing market as a whole. Even more egregious is that the 20 markets tracked by the Case-Shiller Index don’t represent the country’s twenty most populated cities.
The Case-Shiller Index specifically excludes home sale data from Houston, Philadelphia, San Antonio and San Jose — four of the nation’s 10 most populated cities. Yet, the index does include data (more…)
Jun 8, 2012 | Housing Analysis
Standard & Poors released its March 2012 Case-Shiller Index last week. The index is meant to measure changes in home prices from month-to-month, and from year-to-year, in select U.S. cities.
According to the report, home values rose in 12 of the Case-Shiller Index’s 20 tracked markets, and one market remained unchanged.
Of the Case-Shiller markets, Phoenix, Arizona posted the largest one-year gain, climbing 6.1 percent. Atlanta, Georgia posted the largest one-year loss. Values falling more than seventeen percent there year-over-year.
Overall, the Case-Shiller Index was relatively unchanged in March as compared to the month prior, but down nearly 3 percent on an annual basis. Nationwide, says Standard & Poor’s, home values are back to the levels of late-2002.
Don’t be overly concerned, however. Though widely-cited, the Case-Shiller Index is a flawed and misleading metric. It’s methodology almost guarantees it.
The first flaw in the Case-Shiller Index is its limited geography. Despite there being more than 3,100 municipalities nationwide, the Case-Shiller Index tracks just 20 of them. They’re not the 20 largest ones, either. Houston, Philadelphia, San Antonio, San Jose are specifically excluded from the Case-Shiller Index and each is among the Top 10 Most Populous Cities in the United States.
Minneapolis (#48) and Tampa (#55), by contrast, are included.
The Case-Shiller Index’s second flaw is that only tracks the sales of single-family, detached homes. Sales of condominiums and multi-unit homes carry no weight in the index whatsoever — even in cities such as Chicago and New York in which condos can account for a large percentage of the overall real estate market.
And, lastly, when the Case-Shiller Index is published, it’s published on a two-month delay. Buyers and sellers in Massachusetts don’t need housing data from two months ago — they need data from today. The Case-Shiller Index tells us what housing was, in other words. It doesn’t tell us how housing is.
Buyers and sellers need real-time, actionable information. You can’t get that from the flawed Case-Shiller Index. For more accurate, relevant real estate data, talk to your real estate professional instead.
May 2, 2012 | Housing Analysis
Home prices started the year on an upswing.
According to the Federal Home Finance Agency’s Home Price Index, home prices rose by a seasonally-adjusted 0.3 percent between January and February 2012. The index is up 0.4% over the past year, offering a counter-story to the Case-Shiller Index’s assertion that home values are sinking.
Last week, Standard & Poor’s Case-Shiller Index said home values had dropped more than 3 percent in the prior 12 months.
As a home buyer or seller in Worcester County area , data showing “rising home values” or “falling home values” may be of interest to you, but we can’t forget that most home valuation trackers — including both the government’s Home Price Index and the private sector Case-Shiller Index — have a severe, built-in flaw.
Both used “aged” data. Today, the calendar reads May. Yet, we’re still discussing February’s housing data.
Data that is two-plus months old is of little value to everyday buyers and sellers wanting to know the “right now” of housing. And, even then, characterizing the data as “two-plus months old” may be a stretch. This is because the home values used in the Home Price index and the Case-Shiller Index are collected from actual transactions, but at the time of closing.
Considering that most purchases require 45-60 days to close, we can know that when we look at the Home Price Index and Case-Shiller Index reports for February, what we’re really seeing is a snapshot of the housing market as it existed two-plus month plus 60 days ago.
Data that’s 5 months old is of little relevance to today’s buyers and sellers. Today’s market is driven by today’s economics.
The Home Price Index is a useful gauge for economists and law-makers. It highlights long-term trends in housing which can be helpful in allocating resources to a particular project or policy. For home buyers and seller throughout Massachusetts , though, it’s much less useful. Real-time data is what matters to you.
For that, contact me and I can put you in contact with one of the areas best real estate professionals to talk with.
Mar 29, 2012 | Housing Analysis
Recent data suggests that the U.S. housing market is in recovery. However, the data also shows this to be an uneven recovery.
According to the monthly S&P/Case-Shiller Index, for example, home values rose in three of 20 tracked markets between December 2011 and January 2012. 17 tracked markets showed home prices still in decline.
It’s easy to point to the Case-Shiller Index as evidence that the housing market in Massachusetts has yet to bottom, but we have to consider the Case-Shiller Index’s shortcomings — specifically in a recovering economy.
For example, the Case-Shiller Index is based on changes in home prices of a single home, through successive sales. This means that to calculate its home price index, the Case-Shiller searches for sales of the same home over a period of time and calculates the difference in contract price.
This methodology can distort the home price tracker downward during times (more…)
Mar 1, 2012 | Housing Analysis
Standard & Poors released its December 2011 Case-Shiller Index this week. The report is the most widely-cited, private-sector metric for the housing market. The index aims to measures change in home prices from month-to-month, and from year-to-year, in select U.S. cities and nationwide.
According to the report, between November and December 2011, home values fell within 18 of the Case-Shiller Index’s 20 tracked markets; and through the 12 months leading up to December 2011, 19 of 20 tracked markets fell.
Only Detroit posted year-over-year gains, adding 0.50% since December 2010.
Now, these statistics may look dire for the housing market, but it’s important to remember that the Case-Shiller Index — though widely-cited — remains a flawed statistic for everyday buyers and sellers in Worcester County area. Rather, the monthly Case-Shiller Index is more appropriately applied by policy-makers and economists to macro-economic issues than by you and me for buy-or-sell decisions..
There are three ways in which Case-Shiller is flawed — each tied to the way by (more…)
