For those homeowners who think Zillow's "Zesimate" is not an accurate barometer of their home's value, the company's VP of Data and Analytics, Stan Humphries, argues that their regional stats are better than Case-Shiller's because by including both market-rate homes and foreclosures, Case-Shiller both understates the pricing decline among foreclosed homes yet over-states the decline for homes not in distress. From his blog (hat tip: L.A. Land):
According to Standard & Poor’s, the Case-Shiller Index is “designed to measure increases or decreases in the market value of residential real estate.” It’s important to note, however, that “market value” according to Case-Shiller includes all arms-length sales of homes, even those of foreclosed homes.
It’s really an indicator of the change in prices of homes regardless of the circumstances under which they are sold. What won’t surprise many people, however, is that there’s actually a very large difference in prices between foreclosure and non-foreclosure homes...
Unfortunately, in combining both foreclosures and non-foreclosures into a single metric, you’re not really getting a good insight into either market. In the current climate, you’re underestimating the decline in value of foreclosed homes and overestimating the decline in value of non-foreclosure homes.
More importantly, from a consumer perspective, homeowners probably infer that home price indexes are a general indication of the real estate appreciation that they might realize if they were to sell their own home...
For homeowners thinking in this way, Case-Shiller is not a good measure for them to use because the assumptions used to interpret the data do not match the assumptions used to create the data...
Click here for entire post, which includes graphs and tables to make the point in greater detail.
Friday, April 3, 2009
Zillow suggests that Case-Shiller numbers mis-state the market
Tuesday, March 31, 2009
Home prices still declining but flattening out?
The latest S&P/Case-Shiller numbers are out, and the news remains bad, with declines of over 40% since the market peaked in several metropolitan areas. But in some markets, the rate of decline is starting to flatten out. First, from an L.A. Times story:
The S&P/Case-Shiller index of 20 U.S. metropolitan areas was down 19% in January from the same month a year ago, the largest decline for that month on record.
Every one of the 20 metropolitan areas in the index showed a price decline in January from a year ago. Since peaking in 2006, the index now shows double-digit declines in all of the cities measured, and the overall 20-city index has fallen 29% from the peak.
The Los Angeles area, which includes Orange County, was down 39% from its peak in 2006. But the worst decline was in Phoenix, at 49%, and four other metro areas showed greater than 40% declines from their respective peaks: Las Vegas, Miami, San Francisco and San Diego.
Los Angeles area prices declined 26% in January from the previous year. The three sharpest January declines, however, were in Phoenix (35%), Las Vegas (33%) and San Francisco (32%)...
However, Jonathan Lansner thinks that the declines in the Los Angeles area (which this index includes with Orange County) may be flattening out. From his blog:
January’s Standard & Poor’s/Case-Shiller home-price index report for LA/OC region says …
- Local pricing was down 2.8% from December, extending monthly loss streak that dates to February 2007.
- Down 39.2% from the peak in September 2006.
- Down 25.8% in a year, 24th consecutive annualized loss — but it’s the 4th straight month where the year-to-year loss shrank.
- January’s price level for Los Angeles and Orange counties was last seen in September 2003.
