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Posts Tagged ‘S&P/Case-Shiller Home Price Indices’

Bloomberg View Column: Understanding Housing’s Dog Days

August 31, 2014 | 5:04 pm | BloombergViewlogoGray | Charts |

BVlogoThe comparison of housing market statistics against last year’s results produced misdirection in our understanding of it’s current state. Although a year-over-year comparison gets rid of seasonality, the results are at the mercy of how normal the prior year was…

The slowdown in the U.S. housing market has caused much hand-wringing. But keep this in mind: robust housing sales and price gains in 2013 were the anomaly and at odds with tepid economic fundamentals such as income, employment and credit. It’s the year-over-year comparisons that make things look worse than they are.

Read my latest Bloomberg View column
Understanding Housing’s Dog Days.
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My Bloomberg View Column: Housing Data Is Old and Moldy

July 31, 2014 | 11:32 am | BloombergViewlogoGray | Charts |

BVlogo

After being pummeled with confusing sound bits after the release of Monday’s Pending Home SalesIndex by the NAR and the S&P/Case Shiller Index, I thought it was time to set the record straight on the applicability of this research.

This is my second column for Bloomberg View: Housing Data Is Old and Moldy


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Bloomberg Surveillance TV – Guest Host 6-25-14

June 25, 2014 | 8:30 am | bloomberg_news_logo | Videos |


UPDATE: above clip just added – expanded conversation.

Got to guest host an hour (6am to 7am) of Bloomberg Television’s Surveillance with Tom Keene, Scarlett Fu and Adam Johnson to talk housing. The above is just a couple of minutes of the hour (yes, you’re spared). We spoke about Case Shiller, New Home Sales, biting in World Cup Soccer, my fireman son using a GoPro in fires and LeBron/Carmelo’s real worth among other things. Like I said, we did talk housing.

Adam brought up a great point – while the economy is always characterized as 70% consumer driven, 16% of that is actually health care spending so the overall number is really 54%.

Very smart conversations (the topic of biting included). Always fun to join them.

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Time-Shifted Case Shiller: Dallas, Denver Crushing it, Polar Vortex a Non-Issue ‘Cause It’s Still December

June 24, 2014 | 5:29 pm | Charts |

matrixCSI-6-24-14 [click to expand]

The above chart is a generic trend line for the seasonally and non-seasonally adjusted 20-City Case Shiller Index released today using the data from the release.

And here’s the same index that I time-shifted backwards by 6 months to reflect the “meeting of the minds” of buyers and sellers. More specific methodology is embedded in the following charts. By moving the index back 6 months, the changes in the direction of the index are in sync with economic events (reality). In my view this index has a 6 month (5-7) month lag rendering it basically worthless to consumers but perhaps a useful tool for academic research where timing may not be as critical. I’m just grasping here.

matrixCSI-6-24-14INDEXshift

[click to expand]

And here’s a time-shifted trend line for the year-over-year change in the 20 city index. You can see that the pace of year-over-year price growth began to cool at the end of last year. Talk about the weather is still premature since the polar vortex occurred after the new year.

matrixCSI-6-24-14YOYshift

And here is the ranking by year-over-year changes for each city as well as the 10 and 20 city index. Dallas and Denver are no longer under water and Las Vegas, despite recent good news has a long way to go to get to the artificial credit induced high it reached in 2006.

matrixcsi6-2014ranking

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Pulling the Case-Shiller Index Back by 6 Months to Reflect Actual Buyer/Seller Behavior

May 27, 2014 | 10:45 pm | Charts |

matrixCSIshift-5-27-14
[click to expand]

The Case Shiller Index was released today and it continued to confuse consumers, pundits, economists etc…and for good reason. It’s 6 months late.

I wondered what would happen if their index result was pulled back by 6 months to see how it lined up with a couple of significant housing milestones (purple vertical lines). The most recent housing milestone was last year’s Bernanke speech that resulted in the spike in mortgage rates in May-June of 2013.

In the modified trend line (dotted blue) housing prices surge up until mortgage rates spike. This is clearly more logical than the actual index showing housing prices surging for six months after the mortgage rate spike.

In the earlier milestone in April 2010, the adjusted index (dotted blue line) immediately begins to slide after the April 2010 signed contract deadline passed to qualify for the federal homeowner tax credit as part of the stimulus plan. Yes, that’s exactly what happened on the front lines.

I’m going to call this new methodology “time-shifting a housing index.” From an historical perspective, this is a much more useful and reliable trend line. For the near term, it places the CS HP 6 months behind the market without any relevance to current conditions. Then again, the S&P/Case Shiller Home Price Index was never meant to be a monthly housing indicator for consumers as it is currently used by the media. It was originally created to enable Wall Street to hedge housing but never caught on because of the long time lag and therefore the eventual ability of investors to accurately predict the results.


The top chart is fairly self-explanatory but here’s the math again:

  • May 2014 Report Publication Date
  • March 2014 Data (Jan, Feb, March Closings – February is midpoint)
  • January 2014 Contracts (Nov, Dec, Jan Contracts – December is midpoint)

Contracts Assumes 90 days between closing date and “meeting of minds” between buyer and seller i.e. 75 days from contract to close +15 days to signed contract from “meeting of minds.”

“Meeting of Minds” Moment when buyer and seller agree on basic price and terms, usually a few weeks before contract is actually signed i.e. May 2014 Case Shiller Report = December 2013. The optimal moment to measure housing.

Here’s a regular chart that has a longer timeline, with and without seasonal adjustments (you can see that seasonal adjustments are essentially meaningless.)

matrixCSI-5-27-14

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