Case-Shiller House Prices – Where You Live Matters

The S&P Case-Shiller Home Price Index was released today with data through December. In addition to the monthly 10 and 20 city composites (and component cities), today’s release included the national index which is calculated quarterly. The national index and the two composites were down and the press release was gloomy with talk of new lows and possible further declines in 2012.

But here’s some things to keep in mind. The Case-Shiller index values are calculated as three month moving averages, so the December reading may still be reflecting earlier weakness. In contrast, the Federal Housing Finance Agency (FHFA) released results from its house price index last week showing gains in December, based exclusively on December transactions.

It is also clear that the December decline in the Case-Shiller indexes could be seasonal. Admittedly, the home buyer tax credit played a role in housing market dynamics in 2009 and early 2010, but the last three years have shown strong mid-year gains followed by autumn-winter declines.

More importantly, (as I’ve pointed out before, the aggregate indexes don’t tell you much since housing markets are so local. The Case-Shiller composite indexes are a good example of that point. Because they tell almost 20 different stories for 20 different markets, how to interpret the composite is unclear.

The Denver and Dallas markets have largely avoided any boom and bust in house prices. Among the most notorious bubble markets, prices in Phoenix may have stabilized in 2011 while Las Vegas, Tampa and Miami continue to trend downward. The California markets, San Diego, Los Angeles and San Francisco were among the strongest performers while the home buyer tax credit was in effect, but have declined significantly since mid-2010. Boston, Cleveland and Detroit have spent the last 3 years hovering in a narrow range while the Washington, DC market has shown steady gains since bottoming out in 2009, although with a clear seasonal pattern. The remaining markets included in the 20 city composite share some similarities, but also have distinct differences. Roll them all up into one index and I’m not sure what you know.

One final thought.

The press release includes a graph indicating that house prices are back to 2002 levels. This has been interpreted as implying that 10 years of housing wealth is gone. That’s technically true, but again the significance (i.e., level of pain) depends on where you live. House prices in Denver have been relatively flat for the last 10 years while prices in Tampa rocketed then crashed. The wealth implications are as different as the markets are.

Bottom line: focus on local market prices and a broader perspective than monthly fluctuations.

For full histories of the 20 markets included in the Case-Shiller composite, click here (cs).


Tags: , , ,

0 replies

  1. Obviously where you live matters…. I would expect certain areas to handle economic downturn better – for example, beach houses in Florida do better than old suburban Detroit

  2. And yet, the headline in the press release for the S&P/Case-Shiller indexes focuses on the national and composite indexes, rather than the local nature of housing market dynamics and prices.

    I agree it should be obvious that different markets are having different experiences, but that doesn’t appear to be the main point in the press releases and media coverage of house prices.

    Even the quotes from David Blitzer refer to “the” housing market, and the reference to the national index covering all nine census divisions is presumably to emphasize its geographic representativeness. But this focus ignores how localized housing markets are. And including 20 individual markets pales in comparison to FHFA’s coverage of 384 metropolitan areas.

    So I think the local nature of housing markets is a point is worth making, because it does seem to get lost in the discussion.


  1. Craig Kamman — Case Shiller Index Minneapolis / St Paul - for data ending Dec 31 2012

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: