Magazine article Economic Trends

The Latest S&P Case-Shiller Housing Price Indexes

Magazine article Economic Trends

The Latest S&P Case-Shiller Housing Price Indexes

Article excerpt

03.02.09

Declining U.S. home prices led the way into the current worldwide economic crisis, and one sign that the crisis is abating will be when these prices begin to stabilize. More stable home prices would indicate that prices are at a point where buyers can be found and that credit is available.

The December 2008 S&P Case-Shiller Home Price Indexes (released February 24, 2009) offered no evidence that this is happening yet. Over the past year, the 20-city index fell 18.5 percent and the 10-city index fell 19.2 percent. The seasonally adjusted annualized rate of declines for December were 21.3 percent and 19.8 percent, respectively.

The only Fourth District region tracked by the Case-Shiller indexes is the Cleveland-Elyria-Mentor metropolitan statistical area (MSA), which includes at least portions of Cuyahoga, Geauga, Lake, Lorain, and Medina counties. Over the past year, the decline in Cleveland home prices, 6.1 percent, was smaller than in every other MSA included in the indexes except for two, Dallas (down 4.2 percent) and Denver (down 4.0 percent).

Cleveland's aggregate index masks some extreme volatility in its lowest housing tier (homes valued under $116, 639 in November of 2008). In 2008 the index for this particular tier saw annualized monthly percent changes of 223.6 percent, 104.5 percent, 75 percent, -83.1 percent, and -82.9 percent. The absolute value of the index's annualized growth rate has been less than 20 percent only twice in the past 12 months. In fact, Cleveland's tiered-price indexes were not even included in the latest report because they were considered too statistically unreliable. A footnote stated, "After review of the data the standard errors were deemed too large and the December numbers were not believed to be reliable at this time and therefore will not be published."

[GRAPHIC OMITTED]

[GRAPHIC OMITTED]

[GRAPHIC OMITTED]

What is the source of this volatility? It is probably a consequence of the number of observations the indexes have to work with. If there are too few, averages from period to period can vary a lot. These numbers do look unusually low for Cleveland over the past year.

Case-Shiller indexes are constructed by comparing the sales prices of a single-family homes with their previous sales prices. The two prices constitute a matched "pair." In December 2008, there were only 554 pairs in Cleveland for all three tiers. This figure is not only low compared to other cities tracked by the indexes, it is the lowest figure in the whole history of the Cleveland series, which goes back to January 1987. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.