The monthly Standard & Poor’s Case-Shiller Home price index, released on July 29, continues to show year-over-year declines in single family home prices for May, with declines of over 15% in the both the 10-City and 20-City Composite Indices. The greatest year-over-year declines continue to be seen in California, Florida, and the southwest where home prices have fallen over 20% from May 2007.
Boston home price declines were more modest at only 6.2% from May 2007. Of the 20 cities included in the index, Boston had the 5th lowest decline in prices from year-ago levels. Monthly data from April to May 2008 indicate price improvements in seven of the 20 cities, including a 1.0% gain reported for Boston.
As Case-Shiller gains more media coverage, NAR Economists point out that home price trends are divergent, depending upon the source. Housing economists are very cognizant of these differences and NAR continues to educate consumers to be aware as well. For instance, NAR clarifies that its home price analysis captures the median value of home transactions that come from the Multiple Listing Services. It lines up home values from low to high and chooses the middle home and its price. Should the computation be on the average home price change; then a very high weight would be placed on the upper end multimillion dollar homes. Plus, NAR figures are compiled using 150 metro markets nationwide.
The Case-Shiller index reportedly tracks 20 areas, markets with homes that are generally more expensive than the national median. Therefore, the index most probably is skewed toward the upper end of the market. NAR reports that some economists have called Case-Shiller a “rich man’s home index.”
Additionally the Case-Shiller index reports percentage changes as a three-month moving average, but doesn’t report actual home prices. NAR economists find the Case-Shiller index too small a sample and the methodology flawed with limited information. They don’t see how the sampling can logically be indicative of the whole market, as media sources often report.