The Case-Shiller Index and what it means for you

Case-Shiller Annual Change March 2011

You have probably read and heard about this: the March Case-Shiller Index was released this week and it corroborates the findings of the government’s most recent home price index — home values are slipping nationwide.  But let’s take a close look at this index, what it means for you and whether or not it affects you in Marin County.  One thing is certain, It’s not the end of the real estate world.

According to the Case-Shiller Index’s publisher, Standard & Poors, home values fell in March from the year prior.

Worst Case-Shiller Reading In 3 Years

The March report was among the worst Case-Shiller Index readings in 3 years. On a monthly basis, 18 of 20 tracked markets worsened. Only Seattle and Washington, D.C. showed improvement, rising 0.1% and 1.1%, respectively.

On an annual basis, price degradation was even worse.

Washington, D.C. is the only tracked market to post higher home values for March 2011 as compared to March 2010. The national index has now dropped to mid-2002 levels.

The 3 Flaws Of The Case-Shiller Index

As a buyer in today’s market, though, you can’t take the Case-Shiller Index at face value. Its methodology is far too flawed to be the “final word” in home prices.

The first big Case-Shiller Index flaw is its relatively small sample size. S&P positions the Case-Shiller Index as a national index but its data comes from just 20 cities total. And they’re not the 20 most populous cities, either. Notably missing from the Case-Shiller Index list are Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10). 

Minneapolis (#48) and Tampa (#55) are included, by contrast.

98 Cornell Ave., Larkspur, CA

A second Case-Shiller flaw is how it measures a change in home price. Because the index throws out all sales except for “repeat sales” of the same home, the Case-Shiller Index fails to capture the “complete” U.S. market. It also specifically excludes condominiums and multi-family homes. 

In some cities — such as Chicago — homes of these types can represent a large percentage of the market.

And, lastly, a third Case-Shiller Index flaw is that it’s on a 2-month delay. It’s June and we’re only now getting home data from March. Today’s market is similar — but not the same — to what buyers and sellers faced in March. The Case-Shiller Index is far less useful than real-time data of a city or neighborhood.

What the Case-Shiller means to you

The Case-Shiller Index is more useful to economists and policy-makers than to everyday buyers and sellers because it tracks national trends, not local markets.  

I can tell you which homes have sold in the last few days, and at what prices –like 98 Cornell Avenue in Larkspur, which just sold for $1,389,000 on May 25.  The Case-Shiller Index cannot.

The just released May Monthly Report for Marin County shows that the median sale price has gone  up by 5.9% month over month and by 0.6% year over year. 

For real estate data relevant to your particular neighborhood, please contact me.

____________________________________________________________________________

About the author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi.  I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789.  I help people move in and out of Marin County, just north of the Golden Gate Bridge.

I am here to help you make the smartest real estate move and build wealth, providing you with reliable real estate information and advice you can trust.

My knowledge and passion for Marin County are equaled by my commitment to helping you successfully navigate the process of buying and selling a home.  My business model enables me to provide superior service and a better client experience.  I know the neighborhoods, the schools, the amenities; I know where you want to live.  I know and love Marin County! 

I service the following towns in Marin County: Sausalito, Tiburon, Belvedere, Mill Valley, Corte Madera, Larkspur, Greenbrae, Kentfield,  Ross, San Anselmo, San Rafael, Fairfax, and Novato.

Leave a reply