The much anticipated monthly S&P/Case Shiller Home Price Index was released today and the results are important, not because it provides an accurate description of the current housing market (it doesn’t), but because it forms a foundation for consumer sentiment on the housing market.
I selected a few of the 20 cities in the chart above – DC and New York as two of the best performing, Detroit and Las Vegas as two of the worst performing and the 20-City index itself.
I’d be happy to rely on a housing index if it represented the market area I thought it did. If it represented the housing stock I thought it did. Even more importantly, if it represented a current picture of market conditions I thought it did. All I want are accurate housing benchmarks so real estate professionals and their clients can make informed decisions.
Here are the S&P/Case Shiller First Quarter 2011 results:
- National Index fell 4.2% from prior quarter
- 20-city Index fell 0.8% from February 2011 to March 2011 (8th monthly decline in a row)
- Washington, DC increased 1.1%, from prior quarter, the largest gain of all 20 cities tracked
Here is what you may not realize about the S&P/Case Shiller Home Price Index:
- The index was developed for Wall Street to hedge the housing market, not as a monthly consumer metric
- Relatively easy to predict where the results will be in the next period – perhaps why it has not been widely traded by Wall Street and why the press release includes comments like “Home prices continue on their downward spiral with no relief in sight” since S&P/CSI can actually see the formation of future months’ results develop
- Based on a 3 month moving window of closed sales
- Washes out the annual seasons in housing
- Lags contract signing dates by 5-7 months (translation (Q1 2011 report = Q3 2010 contracts)
- Based on prices, not sales activity – yet sales trends can lead price trends by a year or more
- Comprised on single family sales. Excludes, condos, co-ops and new development sales.
- The cities named in their index, such as Washington DC cover a large area of which the named city is a small part. For example, Washington, DC includes District of Columbia DC, Calvert MD, Charles MD, Frederick MD, Montgomery MD, Prince Georges MD, Alexandria City VA, Arlington VA, Clarke VA, Fairfax VA, Fairfax City VA, Falls Church City VA, Fauquier VA, Fredericksburg City VA, Loudoun VA, Manassas City VA, Manassas Park City VA, Prince William VA, Spotsylvania VA, Stafford VA, Warren VA, Jefferson WV. This is not what most readers of the Washington, DC data understand the coverage to be.
RBI already released the Washington DC Metro Area housing stats 3 weeks ago covering pending sales. This is the equivalent of releasing today’s Case Shiller results 6 months ago.
In other words do you want to understand the state of the current housing market for Washington, DC Metro?
…or would rather talk today about what the market was like in 22 cities/counties across three states plus DC around the Thanksgiving holiday last year?
Of course not. Good grief.