Archive for 'Case-Shiller Index'
Ignore The Case-Shiller Index; Focus On The Future Instead
March 2nd, 2011. Published under Case-Shiller Index. No Comments.
Last week, Standard & Poor’s released its Case-Shiller Index for December 2010. The index is a home valuation tracker, meant to meausure the change in home prices from one period to the next.
December’s Case-Shiller Index showed major devaluations nationwide. As compared to December 2009, on a year-over-year basis, home values fell in 18 of the Case Shiller Index’s 20 tracked markets, and the U.S. National Index dropped 4 percent overall.
The retreat puts December’s home values at similar levels as compared to early-2003.
That said, buyers and sellers would be wise to take the findings lightly. The Case-Shiller Index is inherently flawed. As such, its results are neither practical — nor relevant — to everyday Americans.
There are 3 Case-Shiller flaws, in fact.
The first flaw is the index’s limited sample set. Wikipedia lists 3,100+ municipalities nationwide and we can be certain that real estate is bought and sold in all of them. The Case-Shiller Index, however, measures just 20 of them. That’s less than 1% of all U.S. cities. And then, within those tracked cities, Case-Shiller reports an average, lumping disparate neighborhoods and streets into one big number.
The “national figures” aren’t really national, and the “city data” doesn’t apply to your home, specifically.
The second Case-Shiller Index flaw is how it measures home value changes. The index only consider at “repeat sales” of the same home, so long as that home is a single-family, detached property. Condominiums, multi-family homes, and new construction are ignored in the Case-Shiller Index.
Because distressed properties account for such a high percentage of resales lately — 36% in December –foreclosures and short sales skew Case-Shiller Index worse.
And, lastly, the Case-Shiller Index is flawed by “age”. Because it reports closed sales a 60-day delay, December’s Case-Shiller Index is measuring the values of home sales contracts from September and October. The Case-Shiller Index, therefore, is a snapshot of the not-so-recent past, and does little to tell us about the next 60 days.
Overall, the Case-Shiller Index is helpful tool for economists and policy-makers, but it doesn’t do much good for individual homeowners. For accurate, real-time housing data in your local market, talk to a real estate professional instead.
Why You Shouldn’t Put Too Much Faith In October’s Case-Shiller Index
December 30th, 2010. Published under Case-Shiller Index. No Comments.
The Case-Shiller Index posted awful numbers in its most recent reading. Each of the index’s 20 tracked markets showed home price deterioration between September’s and October’s respective report. Some markets fell as much as 2.9 percent.
The drop in values is nothing about which to panic, however. The Case-Shiller Index is just re-reporting what we already knew. It’s a common theme with the Case-Shiller Index, actually; a trait traced to the report’s methodology.
The Case-Shiller Index is an imperfect housing indicator with 3 inherent flaws.
The first flaw is that the index makes use of a limited data set, tracking values in just 20 cities nationwide. That data set is then projected across the more than 3,100 other municipalities in the United States. The “national figures”, therefore, aren’t really national.
The second flaw is that, even within the tracked 20 cities, not all home sales are included. The Case-Shiller Index only tracks sales of single-family, detached homes, and within that market subset, it only uses homes that are “repeat sales”. This specifically excludes sales of condominiums and multi-family homes, and new construction.
Lastly, Case-Shiller Index’s third flaw is its “age”. The Case-Shiller Index reports on a 60-day delay, and the values it reports are tied to contracts written even longer ago. Sales contracts from July and August are responsible for October’s closings so when we see the Case-Shiller Index as reported in December, some of the data it’s reporting is 5 months old already. That’s too old to be relevant.
Looking back at 2010, housing was at its weakest between May and August. Therefore, it’s no surprise that the most recent Case-Shiller Index shows significant weakness. Looking forward, we should expect the report to improve — especially because of how strong New Home Sales and Existing Home Sales have been since summer.
The Case-Shiller Index is helpful for economists and policy-makers. It’s not much good for individual homeowners, however. For accurate, real-time housing data, talk to a real estate professional instead.
Case-Shiller Posts 16th Straight Month Of Home Price Improvement
September 1st, 2010. Published under Case-Shiller Index. No Comments.
According to the Standard & Poors Case-Shiller Index, home values rose 5 percent in June versus the month prior, and 4 percent from a year earlier. It’s the 16th consecutive month in which Case-Shiller reported an increase in home values and the third straight month of outstanding results.
That said, homeowners and home buyers would do well to temper Case-Shiller enthusiasm. The June figures are issued on 60-day delay and, over the last 60 days, housing data has been lackluster at best.
- Existing Home Sales are down 27 percent
- New Home Sales are down 12 percent
- Homebuilder confidence is down
Stories like these highlight a key weakness of the Case-Shiller Index — it’s out of date as soon as it’s published. Because of this, the Case-Shiller Index relevance to everyday Americans is muted. People don’t buy homes in the “60 days ago” real estate market, after all.
June is ancient real estate history.
However, the Case-Shiller Index does have its place. As the most widely-followed, private-sector housing tracker, the index is used to help make policy decisions and to shape Wall Street’s expectations of the economy. This means that a strong Case-Shiller reading can cause mortgage rates to rise, and a weak Case-Shiller reading can cause rates to fall.
Tuesday, mortgage rates fell.
Case-Shiller Shows Home Price Improvement In 95% Of Cities
July 28th, 2010. Published under Case-Shiller Index. No Comments.
Standard & Poors released its Case-Shiller Index Tuesday. On a seasonally-adjusted basis, between April and May 2010, home prices rose in 19 of Case-Shiller’s 20 tracked markets. It’s the second straight month of strong Case-Shiller findings.
Also, May’s numbers are a mirror-image of February’s. In February, 19 of 20 markets lost value.
In its press release, the Case-Shiller staff resisted calling May’s data proof of a housing recovery, noting that home values remain flat as compared to October of last year. However, there are some noteworthy numbers in the Case-Shiller report.
- 13 of the 20 tracked cities are showing home price improvement year-over-year
- Foreclosure posterchlld San Diego has now shown 13 straight months of improvement
- San Diego, San Francisco and Minneapolis are showing double-digit annual growth
These are all good signs for the housing market, but the Case-Shiller Index is not without its flaws. Most notably, the data is limited to just 20 cities nationwide — and they’re not even the 20 largest ones.
Cities like Houston, Philadelphia, and San Jose are excluded from Case-Shiller, while cities like Tampa (#54) are not.
Another Case-Shiller flaw is that it reports on a 2-month delay.
Therefore, today is several days from the start of August but we’re now reflecting on data from May. Given the speed at which the real estate market can change, May’s data is almost ancient. Today’s values may be higher or lower than what Case-Shiller reports.
For home buyers, reports like the Case-Shiller Index may not be useful in making a “Buy or Not Buy” decision, but can aid in watching longer-term trends in housing. For real-time data, talk to a real estate agent with access to local figures instead.
Case-Shiller Shows Home Price Improvement In 90% Of Cities
June 30th, 2010. Published under Case-Shiller Index. No Comments.
Standard & Poors released its Case-Shiller Index Tuesday. The index is a monthly home valuation report from select cities and among the private sector’s most popular home pricing models.
In reviewing the April Case-Shiller Index and its accompanying analysis, it appears that the housing market’s rebound is gathering momentum.
In the index’s 20 tracked cities:
- 18 of 20 improved from March to April 2010
- Versus April 2009, home prices are up nearly 4 percent
- The two “down” cities from April — Miami and New York — are off just 0.5% and 1.0% annually, respectively
Furthermore, as another sign of strength, San Diego, a city in which homeowners have lost a lot of equity since 2007, has now shown 12 straight months of home price improvement.
However, the Case-Shiller Index must be kept in context. It’s far from perfect.
For one, the index reports on a 60-day delay; it’s only now showing data from the end of April, when the federal homebuyer tax credit was expiring. Home sales have been weak since then it’s been reported.
And second, the Case-Shiller Index is limited to just 20 cities nationwide. Therefore, the index doesn’t consider every home sale in every American city — it only considers a select few. Many more U.S. homes are excluded from the Case-Shiller Index than are included.
But, despite its flaws, the Case-Shiller Index remains important with respect to economic analysis. Much like the government’s Home Price Index, Case-Shiller helps to identify broader trends in housing that shape government and monetary policy.
The Headlines Were Overly Rosy On February's Case-Shiller Index
April 30th, 2010. Published under Case-Shiller Index. No Comments.
Earlier this week, Standard & Poors released its February Case-Shiller Index, a home price tracker for select metropolitan areas.
Overwhelmingly, home values fell in the 20 markets tracked by the Case-Shiller. Only San Diego showed a modest increase. The other 19 markets averaged a 1.23 percent decline between January and February.
However, that’s not the story you read in the most papers. Instead, headlines read that home values were up in the United States, citing annualized data.
Unfortunately for active home buyers and sellers, year-over-year data isn’t all that helpful when making a real estate decisions. It’s the month-to-month data that matters. Month-to-month changes in home prices are what defines a housing market. Month-to-month is what sets the tone for contracts and negotiations on a purchase.
The rosier, annualized data published this past week just doesn’t capture the reality of what was the February 2010 market. And even then, the data is somewhat useless because it’s from February and May will be upon us next week.
Case-Shiller is on a 2-month lag — hardly reflective of the “right now” of real estate in Chicago.
When you’re looking for real estate data that actionable, consider using sources that are more “real-time”. A real estate agent may be the right place to start. Because for all the data that Case-Shiller and the other housing indices collect, it can never be as relevant to your individual needs as a well-executed, timely market analysis.
