It's time to comment on updated S&P Case-Shiller home price index
data. As always, the index lags, so the latest data gets us
through April 2011. For this discussion, I have focused on the
Case-Shiller 10-City and 20-City indices and how home values have
performed there compared to Austin. In addition, because of a
number of recent articles about Washington, D.C. as the best-performing
Case-Shiller city (which it is) and as the only U.S. with increasing
home values (which it is not),
I have added Washington to this month's comparison.
The Case-Shiller indices have not told a happy story recently, with
both the 10-City and the 20-City compilations losing ground steadily
since July 2010. Both stopped their losses in April, but they are
now at about the same levels as January 2009:
Now, compare those indices with Austin and Washington, DC:
Notice that the mid-decade "bubble" in Washington was even larger than
the indices, and home values there fell almost in parallel with the
indices. Washington home values "stabilized" at a higher level
than the index cities and is now about the same as in June 2004.
Compare that to the indices themselves which, at the end of the period
charted here, were approximately equal to their positions in April 2003
(10-City) and July 2003 (20-City).
As I have pointed out many times, residential real estate remains an
important store of value for most homeowners. I do not advocate
considering your "home" an "investment" because that can lead to the
kind of piggy-bank behavior that led to the price bubble that is so
apparent in these charts. That said, even through the really
significant market problems since 2007, it is still true that on
average real estate has gained value over any ten year period since
World War II.
Since Austin is not included among the Case-Shiller cities I have used
the 12-month moving average of sale prices as a proxy. Notice
that that point in April 2011 was higher than all points to the left on
that line. Our average prices dipped a little in 2009 and 2010,
but they have recovered and are on the rise again. I expect the
12-month average to dip again in July 2011 because the period being
averaged will no longer include the all-time highest point in July
2010, but the trend remains clear.
As one last comparison, consider year-over-year changes in these price
indices:
First, notice that the Case-Shiller indices have been losing ground
year-to-year for several months. For much longer -- about sixteen
months -- both Austin and Washington, DC have been gaining. And
look at the magnitude of those gains -- Austin vs. Washington!
Yes, Washington home values have appreciated more than Austin since
2000, but it would have been very easy for five of those years to pay
more for a home there than the current market would yield. Not so
in Austin.
Separately, I will update my Austin Market Dashboard and elaborate on
market conditions in Central Texas. It's not all rosy, even here,
but for real estate market performance I would rather be here than
anywhere else in the United States.
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