Bill Morris: Case-Shiller Index -- interesting, but caution for local readers

Case-Shiller Index -- interesting, but caution for local readers

This week, the S&P/Case-Shiller home price index was published, showing that the index declined 2% in the 3rd quarter of 2010, and that nationally home prices were down 1.5% compared to one year earlier.  It's interesting data, and from a macroeconomic viewpoint probably useful, but I am skeptical of national averages and indices in a business that is 100% local.

As I have discussed extensively, the Texas housing market has behaved very differently throughout this recession and housing crisis than California, Florida, Arizona, and Nevada.  Moreover, the Austin/Central Texas market has consistently been stronger than even Texas averages.  While S&P's selection of cities used in their index may be representative of the nation in some way, I note that only one of the metro areas in the Case-Shiller 20-city composite is in Texas.  Seven of the index metros are in California, Florida, Arizona, and Nevada -- those that suffered most in recent years.  Atlanta, Cleveland, and Detroit are also part of the index, so 50% of the composite index is based on the performance of markets that were hardest hit by the housing downturn. 

Among the twenty cities in the index, five showed year-over-year increases in home price index.  Three of those -- Los Angeles, San Diego, San Francisco -- have been prominently featured in the news for the magnitude of home value declines, so even 4% to 5% annual increases, while absolutely welcome, still leave much room until a "recovery" can be declared.  The index in Washington, D.C., while far from the experience of those California cities, remains about 25% below its peak in 2006, and the fifth of these metros,  Boston, is still down about 15%.

Dallas, on the other hand, after seeing its home price index decline 1.9% year-to-year, remains only 5.5% below its pre-recession peak.

Separately, I will provide a closer look at the Austin/Central Texas market -- volatile in its on right, and far from immune to the effects of the recession.  For now I'll just salute S&P for attempting to compile a useful national index of home values, and caution prospective home buyers and sellers about reading too much into this national data.

Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
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Comment balloon 1 commentBill Morris • December 02 2010 01:43PM


Bill, I completely agree with you.  National statistics are merely a gauge of the overall well being of the real estate market and have little to do with what's happening in local markets.  Consider how many buyers and seller of real estate have false impressions of their local market because of what they hear on the news and read in the local newspapers.  That's where we can step in and provide value...  

Posted by Keith Vermilyea (Home Buyers Marketing II, Inc.) over 9 years ago