News from another housing market tracking firm was released Tuesday. Standard & Poor's reported that home values in 20 major cities fell a record 18.2% in the 12 months ending in November. The S&P Case-Shiller 20-city home price index fell 2.2% in November, with home values in all 20 cities falling at least 1%. Prices in these cities are down 25% from the peak in mid-2006, according to Case-Shiller.
In the past year, according to the Case-Shiller Index, prices were down 33% in Phoenix, 32% in Las Vegas, and 31% in San Francisco. The best performance over the past year came in Dallas, where prices fell just 3.3%. Many of the cities tracked in this housing index are the ones, like Phoenix and Las Vegas, which had the sharpest price rises during the housing boom. Dallas lagged other cities in price rises during the housing boom.
There are limitations to the Case-Schiller index, though it is widely followed by Wall Street investors. Among the limitations are that only 20 major cities are tracked and these are the highest priced areas in the country and, therefore, some of the hardest hit in the credit crunch and housing slowdown. Another limitation of the index is that the Case-Shiller methodology excludes homes that have had improvements in an attempt to account for the fact that the new buyer is purchasing a home that is really different from the home that the seller purchased. By this exclusion, however, the index eliminates the relatively attractive homes and limits its measurement to what are generally called "outdated homes." This methodology becomes statistically insignificant in a smaller market like Flagstaff, which is why the index tracks only major cities.
A similar index from the Federal Housing Finance Agency released last week found prices fell 1.8% in November and 8.7% in the previous 12 months. The FHFA index tracks the whole country, but relies on data from Fannie Mae and Freddie Mac, so it does not include most of purchases financed by subprime loans earlier in the decade.
Both of these indexes release data that is nearly two months old by the time it becomes available. Data from the National Association of Realtors®, released Monday, is a month ahead of the other two indexes. It reports only information from multiple-listing-services and thus excludes any private transactions – in the current market that is less significant than it was when a homeowner could put up a sign and expect to sell on his or her own. (Contrary to some reports, most bank-owned, aka foreclosures, pass through the multiple-listing services.) |
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