Each month we are offered a smorgasbord of measures of just how good or bad the "market" is. The S&P® Case Shiller Housing Index, the NAR® reports of changes in the median price of housing sales and of sales of existing homes, and the RealtyTrac® Foreclosure index are widely published. More recently I've discovered the Office of Federal Housing Enterprise Oversight Housing Price Index. Boy, that's a mouthful!
What do these surveys mean for you and your client? That's hard to know unless you first determine what is actually being measured, who is measuring it and what other agendas they're marching to that might influence the interpretation, presentation or distribution of the report. What is held up as the measurement is often the conclusion based upon a specific data set that is rarely explained in the media report. By understanding the source of the data and who is compiling it, you can put the information in a context that will help you and your clients better understand your business and your market.
The NAR® reports come from data on homes sold in a given period. The data is compiled from local boards and MLS groups nationwide and by NAR® estimates includes 30% to 40% of the actual sales in a given period. The index is measured against the same data for prior periods. The data includes most residential single family and condominium property types. The data is reported by Metropolitan Statistical Area (MSA).
The Case-Shiller® 10 market and 20 market surveys are widely reported monthly. These surveys are based upon public data from local recording and assessing agencies in 10 or 20 large markets around the country. The Case-Shiller® National Survey is reported quarterly for nine Census areas comprising the entire country. The Case-Shiller® methodology is interesting. It seeks to compare the prices of two sales of the same property over a period of time, but not less than six months. New construction, condominium, and co-op sales are excluded. REO sales are included.
The OFHEO Housing Price Index is based upon both sale and refinance data collected by Fannie Mae and Freddie Mac in the course of their acquisition or securitization of mortgages. OFHEO also publishes a survey of only sale data. The data is reported for 29 MSA's.
The RealtyTrac® data is based upon the measure of various actions that take place during the course of a foreclosure. These include notice of defaults, the filing of lis pendens, notice of Trustee sales and foreclosure auctions and REO owned. The metric widely reported from this survey is number of foreclosures per housing units in a given territory.
All of these surveys to some greater or lesser extent use actual data from public and/or private sources and then through analysis or algorithmic equations project it to come up with a "national" conclusion. This national conclusion though does not necessarily reflect what's going on in your market. Things could be worse or they could be better. Our clients need to understand that by the time the Case-Shiller® 10 market index gets down to the local paper or the Eyewitness News teaser, the methodology and the precision of the survey are stripped out. All that's left is "Survey shows that housing prices are dropping like a rock. Stay tuned to see how this news will ruin your life." Being able to tell a client why the specific data from particular survey is irrelevant or germane to their situation is a powerful statement of your expertise.
The agenda of who is publicizing the survey is also important to forming an opinion about the survey. The NAR's perspective is obvious. S&P certainly wants the Case-Shiller Index to be widely reported and highly regarded. S&P's uses the index to create a futures market for housing prices. RealtyTrac® is in the business of selling information about foreclosures, where and how to buy them. I'm not questioning the integrity of the surveys. But I'm not naïve. The owners and publishers of the reports want them viewed and quoted in a certain context. They want them to become widely accepted standards of information. They work to promote them in that manner.
Each of these surveys has their proponents and critics. Discussion usually centers on the perceived validity or shortcomings of the data used to compile the survey, the manner in which the data is analyzed, or the conclusions drawn from the analysis. If the interest is here, I'll be back with more on this from time to time. Post a comment and let me know.
Here are the websites if you want to read about the reports.
NAR® http://www.realtor.org/research/research/ehsmeth;
Case-Shiller® http://macromarkets.com/csi_housing/sp_caseshiller.asp ;
OFHEO http://www.ofheo.gov/hpi.aspx?Nav=306
RealtyTrac® http://www.realtytrac.com/
As for the headline on this post, you ask? I looked at this blog and one other and reported my findings.
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