Zillow suggests that Case-Shiller numbers mis-state the market

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.