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Funny thing is, Case Shiller Doesn’t Reflect The Washington, DC Metro Area Housing Market

May 31, 2011  |  by Jonathan Miller

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.

Posted in Blog, Jonathan Miller Insights

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15 Responses to “Funny thing is, Case Shiller Doesn’t Reflect The Washington, DC Metro Area Housing Market”

  1. MRIS_CMO says:

    Nice work. Jonathan.

    This is an example of great actionable information that our customers can use every day with buyers, sellers and past, prospective and current clients.

    To go RBI (www.rbintel.com) for more on how you can be the "smartest person in the room" on Baltimore/DC/Virginia Metropolitan market conditions, trends and analyses.

  2. Victor Luind says:

    can you plot the RBI housing index against the Case Shiller on the same graph – it would be interesting to see the results.

    • MRIS_CMO says:

      True, interesting, but it's not apples to apples. That's the issue … I'd like to see RBI do this for MLS' everywhere so we could benchmark that data and develop a MLS Pending Sales Index. Thanks for the comment, Victor, we appreciate your keeping an eye or two out for us! Cheers, John

    • Thanks for your interest Victor – posting something along these lines soon!

    • Real Estate Agent says:

      like victor said, i think i understand the point you’re making, it seems like seeing both indices on a single chart would be far more explanatory. thanks for the take!!

  3. tbrander says:

    Great work, I knew the CS Index was flaky but had not taken the opportunity to delve into all the particulars..

  4. [...] other day I presented my frustration with the disconnect that some national housing indexes have with local housing markets and how it helps form inaccurate [...]

  5. Colin Storm says:

    I spend a significant amount of time on my blog making local interpretations for the national news sound bites. What maters to people is not what is happening around the country, or even what is happening in DC as a whole. What matters is what is happening in an owners neighborhood, or the neighborhood someone wants to buy in.

    I will say that data sources like the CS index do give agents a great opportunity to show that they are knowledgable experts.

    Great piece, and very important! Thank you!

  6. Sandy says:

    Great post. Sellers in my area, Fredericksburg, VA, are listening to the great news about DC Metro area and don't realize that, although we are technically part of that market, we are not sharing in the upswing at this time.

  7. L..Hilton says:

    Jonathan, What areas does RBI include it its Washington DC metro area?

  8. Her be rt A. Davis says:

    A national picture of the "housing market" is about as useful as a national weather forecast. The house price situation varies by neighborhood,, not by region, and certainly not nationaly.

    Herbert A. Davis, Associate Broker, Prudential Carruthers

  9. [...] This is a terrific piece by Jonathan Miller —  breaking down the real estate market in the Wa… Share this: Filed Under: Featured, Real Estate Tagged With: case shiller, home prices, indices, market, real estate, S & P, Washington DC [...]

  10. [...] here is a link to a recent blog post from MRIS (our software provider for all local Multiple Listing Service data).  Even there you will see that [...]

  11. [...] the results of Case Shiller’s data equivalent of RBI’s most recent pending sales data won’t be se…, the RBI results for Washington, D.C., Virginia and Maryland have been available to the public [...]

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