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 Corpus Christi 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. 

Filed under: Housing Analysis by Julie Woodward
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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 Port Aransas , 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 of Beachwalk 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.

Filed under: Housing Analysis by Julie Woodward
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