Mortgage News in the Carolinas
Posts tagged Case-Shiller Index
Case-Shiller Shows Uneven Recovery For U.S. Housing
052 days
by Geoff Brown
in 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 Carolinas 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 of weak economy because there is no distinction made for homes sold in foreclosure or as a short sale.
35% of all homes sold in January were “distressed”, says the National Association of REALTORS®.
Another distortion in the Case-Shiller Index is that the model neglects all home types that are not of type “single-family residence”. This means that multi-unit homes and condominiums are excluded from the Case-Shiller Index model.
In some markets, such as Chicago and New York City, condominiums account for a large percentage of overall sales.
Lastly, the Case-Shiller Index is published with a “lag”, which renders it useless to buyers and sellers of Charlotte in search of real-time, relevant data. The most recent Case-Shiller Index is published with a 60-day delay, and accounts for home purchase contracts written between October and December 2011.
Since October, the U.S. economy has added more than 1 million jobs and the economy has moved into “moderate expansion”, according to the Federal Reserve. Data that’s two seasons old does little to help us today.
Making sound real estate decisions is about having timely, relevant data at-hand when it’s needed. The Case-Shiller Index fails in that respect. It’s good for highlighting the U.S. housing market on the whole, as it existed in the past. For real-time market data, though, you’ll want to talk with an active real estate agent.
Detroit Leads All Case-Shiller Cities In Home Price Improvement
0207 days
by Geoff Brown
in Housing Analysis
The August 2011 Case-Shiller Index was released this week. On an monthly basis, 10 of 20 tracked markets worsened. On an annual basis, valuation degradation was worse.
Only Detroit and Washington, D.C. posted higher home values in August 2011 as compared to August 2010, rising 2.7% and 0.3%, respectively.
However, the index has been moving in the right direction. Since bottoming out in March of this year, the Case-Shiller Index is up nearly 4 percent.
As home buyers and sellers in Charlotte , though, we have to remember that the Case-Shiller Index is a flawed product; its methodology too narrow to be the final word for housing markets.
The Case-Shiller Index has 3 main flaws.
The first Case-Shiller Index flaw is its relatively small sample size. Although it’s positioned as a national housing index, Case-Shiller data represents just 20 cities nationwide, and they’re not even the 20 most populous U.S. cities. For example, cities like Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10) are excluded from the Case-Shiller Index findings.
By contrast, Minneapolis (#48) and Tampa (#55) make the list.
A second Case-Shiller Index flaw is the way in which it measures home price changes. The Case-Shiller Index formula ignores all home sales except for “repeat sales” of the same home. New homes don’t count for the Case-Shiller Index. Furthermore, the index ignores condominium and multi-family home sales, too.
In some cities, condos can account for a large percentage of sales.
And the third Case-Shiller Index flaw is that the data is reported on a 2-month lag. Next week marks the start of November, yet we’re still discussing data from August. A lot can change in two months (and it often does). Today’s market conditions are similar to — but not the same as — market conditions from before Labor Day.
The Case-Shiller Index is far from “real-time”.
As a monthly release, the Case-Shiller Index does more to help people with a long-term view of housing, including politicians and economists, than it does for everyday buyers and sellers who negotiate prices based on current demand and supply.
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.
Case-Shiller Index : 85% Of Tracked Cities Showed Home Price Improvement In July
0234 days
by Geoff Brown
in Housing Analysis
Standard & Poors released its monthly Case-Shiller Index this week. The Case-Shiller Index measures home price changes from month-to-month, and year-to-year, in 20 select U.S. cities. It also reports a “national” index; a composite of the values in said cities.
The most recent Case-Shiller Index shows a 0.9% rise in home values from June to July 2011. Home values were higher in 17 of the 20 tracked cities. Only Phoenix and Las Vegas fell. Denver was flat.
Also noteworthy is that, of all of the Case-Shiller cities, Detroit posted the strongest 1-year, home price improvement. As compared to July 2010, home values are higher by 1.2 percent in Detroit. This bests even Washington, D.C. — long-believed to be the nation’s healthiest housing market.
That said, we should be careful of the conclusions we draw from July’s Case-Shiller Index — both on a city-wide level, and on a national level. This is because, as with most “home price trackers”, the Case-Shiller Index has flaws in its methodology.
The first Case-Shiller Index flaw is its limited scope. Although it’s purported to be a “nationa”l housing index, the data that comprises the monthly Case-Schiller Index is sourced from just 20 U.S. cities. These 20 cities represent just 0.6% of the more than 3,100 municipalities nationwide.
The second Case Shiller Index flaw is that the sample sets include single-family, detached homes only. iCondominiums, multi-unit homes, and new construction are specifically excluded from the Case-Shiller Index.
In some markets, “excluded” home types outnumber included ones.
And, lastly, the Case-Shiller Index is flawed in that it takes 2 months to gather data and report it. It’s nearly October, yet we’re still discussing the real estate market as it existing in July. For buyers and sellers in Charlotte , July in ancient history.
The Case-Shiller Index is useful for tracking long-term trends in housing, but does little to help individuals with their choices to buy or sell a home. For relevant, recent real estate data, talk to a real estate agent in your market. Real estate agents are often the best source for real-time, real estate data.
Why You Shouldn’t Put Too Much Faith In October’s Case-Shiller Index
0507 days
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.
