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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.

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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.

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.

Tags: Case-Shiller, Polar Vortex, time-shift, S&P/Case-Shiller Home Price Indices

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I had a nice discussion with Tom Keene, Sara Eisen and Alix Steel, along with guest host Byron Wien, vice chairman of Blackstone Group LP’s advisory services on the state of US housing and the latest Case Shiller numbers.

More importantly, I’m still the mayor of Bloomberg TV’s Green Room on Foursquare.

Tags: Case-Shiller, Bloomberg TV, Bloomberg Surveillance, Cash, Television

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Yesterday’s release of the Case Shiller Index prompted a flurry of coverage given the 20-cities’ highest YoY increase in 7-years. I did a three way split interview from a remote location in CT (see studio set up below). I was a guest along with Vincent Reinhart, chief US economist at Morgan Stanley and Stan Humphries, chief economist at Zillow Inc. Betty Liu and Adam Johnson kept the conversation going.

I especially liked Stan’s modification of the Case Shiller Index results which excluded foreclosures and his research on low and negative equity (my explanation for low inventory right now). The drop in foreclosure activity over the past year caused significant skew to the mix. According to Stan the index would show roughly a 5% increase YoY rather than an 10.9% increase. A huge difference and yet another reason why this index does more harm than good to our understanding of the housing market.

Vincent’s observation that seasonality is considered in Case Shiller is basically wrong – not technically wrong because the data is seasonally adjusted. However the methodology of a repeat sales index washes out seasonality. If you look at the Case Shiller chart, there hasn’t been “seasons” in housing since 1987. That’s simply not true. The Case Shiller Index does not reflect annual housing cycles.

Since Case Shiller Index lags the signing of contracts by 5-7 months, expect to see much higher YoY results this summer.

How the sausage is made

Bloomberg TV is always great to work with – they arranged for me to use a remote studio in CT through a third party. Here is what the studio looks like. Amazingly primitive but it works!

Tags: Case-Shiller, Stan Humphries, Bloomberg TV, Zillow, Seasonal Adjustment

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Well the frequently maligned but most influential housing metric was published yesterday, the S&P/Case Shiller Home Price Indices and the 20 City index rose 4.3% year-over-year. The only two “regions” to see declines were Chicago and New York.

Baseball Correlation? Chicago and New York are the only 2 cities who also have 2 Major League Baseball teams. No, Los Angeles doesn’t have two MLB teams…the Los Angeles Angels of Anaheim are clearly trying to have it both ways.

But I digress…

With all the talk about “recovery” (aka happy housing news) these days it just dawned on me that since 2000, the Case Shiller HPI only began to show significant seasonality since mid-2009. No one has really talked about this and I’m not sure what it means, but it just jumped out at me today.

Pre-peak housing prices fueled by falling lending standards and the seasons were largely crushed by the locomotive known as the housing boom. Therefore the seasonally adjusted and non-seasonally adjusted price trends were virtually the same during the market’s ascent. I distinctly remember real estate agents commenting during this period that the seasons were going away and housing market patterns were changing permanently.

Post-peak housing prices After the plunge subsided in mid-2009, the market began to ebb and flow with peaks in the spring/summer and troughs in the fall/winter.

Note to self
The next time CSI prices begins to smooth into nothingness, perhaps it’s a housing boom, baby.

Tags: Case-Shiller, Seasonality, New York Observer, Seasonal Adjustment

Comments Off on [Case Shiller] Recovery Is Back In Season

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I like this index chart from the report (2nd chart presented in their report) better than the more commonly used % based chart (1st chart presented in their report) because it provides better context. The recent trend is clearly a small see-saw but still sliding in general. I’m not a fan of the CS index for its 5-7 month lag but since it’s some sort of gold standard for housing, it’s important to point out that this clearly shows housing remains tepid at best.

But more importantly…

Shortly after the S&P/Case Shiller report was released this morning at 9:00am, I got the following CNN Breaking News email at 9:15am:

Home prices in 20 major U.S. cities rise to highest level in nine years, according to a new report.

I just about had a heart attack, wondering how I could be so far off in my assessment of the housing market. However I opened the report and the numbers didn’t show that kind of gain.

At 10:21am I received a followup email from CNN Breaking News:

Correction: Home prices rose in July to their 2003 level, but remain lower than the peak in 2006. CNN’s previous alert erroneously stated that home prices had risen to the highest level in nine years.

Not to single CNN out since this has happened at ABC, Breitbart and Fox.

Speed comes at a price: Accuracy.

Similar phenomenon in the appraisal business. The absurd speed demanded by retail banks and AMCs of their appraisers even after the “lessons learned” in this credit crunch, attracts the wrong kind of appraiser. Speed still trumps accuracy.

Home Prices Increase Again in July 2012 [S&P/Case Shiller]

Tags: Case-Shiller, Appraisal Management Companies, AMC

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Last week S&P made the decision to de-emphasize seasonal adjustments given the chaos of the past several years. A good move towards better transparency.

The S&P/Case Shiller Index showed:

• 0.6% increase year over year, first in about 3 years – caused by the tax credit.
• 20-City Composite is down 32.6% since June/July 2006.
• Month over month decline in 19 of the 20 cities in the index.
• 0.9% decline from January to February 2010, 5th consecutive monthly decline.
• As of February 2010, average home prices across the United States are at similar levels to where they were in late summer/early autumn of 2003.

After 5 consecutive months of m-o-m declines, the Case Shiller Index is feeling the influence of rising foreclosures and a possible housing double dip, despite the stimulus in sales activity from the multiple federal tax programs.

Tags: Case-Shiller

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“While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

Good news, bad news = mixed message

• 10 months of improved readings in the annual statistics, beginning in early 2009
• third consecutive month these statistics have registered single digit declines, after 20 consecutive months of double digit declines.

“While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details.”

• Four of the markets – Charlotte, Las Vegas, Seattle and Tampa – posted new low index levels as measured by the past four years.
• Only five of the markets saw price increases in November versus October.

The report also shows that prices are equivalent to late 2003.

What I didn’t understand was the following:

We are in a seasonally weak period for home prices, so the seasonally- adjusted data are generally more positive, with 14 of the markets and both composites showing improved prices in November.

This sounds to me like the seasonal adjustments are skewing the data more positively than it should?

When I read the report, it seems like the message is no more mixed than it was in the prior 2 months. With rising foreclosures expected in 2010, perhaps the report commentary is banking on a more significant impact later this year but the data doesn’t yet show it.

Tags: Case-Shiller

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Here’s the summary:

The S&P/Case-Shiller 20-city home-price index, a closely watched gauge of U.S. home prices, rose 1.6% in July from June in the third straight monthly increase, but prices remain below year-earlier levels.

For the sixteenth straight month, no area in the 20-city index posted a year-over-year price gain. That put nationwide prices at levels seen in 2003.

“These figures continue to support an indication of stabilization in national real estate values,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “But we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.”

Whether or not we see a renewal in tax credits, its hard to imagine a housing market recovery with another year of increasing foreclosures. Perhaps the worst is over, but I would think the best we can hope for in the near term is stability.

Tags: AMC, Appraisal Management Companies, Case-Shiller

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Tags: Sub-Prime, Robert Shiller, Case-Shiller

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Professor Robert Shiller took time out from his busy schedule when he was in New York to pay me a visit and let me interview him for The Housing Helix Podcast.

I invited him after I read his recent Op-ed piece in the New York Times, Why Home Prices May Keep Falling.

Dr. Shiller is well known for many things, including his New York Time’s bestselling book: Irrational Exuberance and his widely referenced monthly state of the housing market tool, The Case-Shiller Index. But he also continues to write about the housing market, having released two books over the past two years:

Last year’s The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It

and this year’s

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

I hope you enjoy his insights.

Check out this week’s podcast.

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

Tags: Robert Shiller, Sub-Prime, Case-Shiller

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I have a long history of dissing the relevance of the S&P/Case Shiller Index because of the 6 month lag and the slew of anecdotal link-the-dot official commentary associated with it that literally has nothing to do with the numbers generated (gasping for air). However I feel compelled to look at it periodically because it is part of the media’s monthly market report gauntlet.

The S&P/Case-Shiller Home Price Indices were published today so I thought I’d create a trifecta of ways to look at the same data.

Top Chart – This is the famous year-over-year % change view which I believe is the best way to look at the market and the scariest. They use the seasonally adjusted index and the non-seasonally adjusted index (so did I) but there is virtually no difference. Most news coverage of the index usually link to the press release which embeds this type of chart that uses all the broad indices: 10-city, 20-city and National. The 20-City has long been the primary index that was touted but the references in the media are shifting to the national index and that’s probably a good thing.

Middle Chart – This is the month over month version using the same data. Clearly the seasonal adjustment smooths out the line. However the non-seasonally adjusted versions shows a significant impact from the seasonal nature of real estate – in fact this chart shows that seasonal patterns are becoming more extreme since the financial crisis began. Originally the index was virtually all about the month over month results even though the featured chart was year-over-year. They have since moved year-over-year to the front of the press release and has already influenced the way the index is presented in the media which is good to see.

Bottom Chart – This is the only chart that uses the actual index numbers rather than percentages. It’s a sleepy pattern that seems to wash out seasonality a bit and shows the market in a less intimidating way. Ironically, the actual index trend is visually less interesting. Seems ironic.

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Tags: S&P/Case-Shiller 20-City index, repeat sales index, Explainer

Comments Off on Explainer: Three Ways to Look at S&P/Case-Shiller Index Results

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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.)

Tags: Case-Shiller, S&P, time-shift, S&P/Case-Shiller Home Price Indices

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