Case Shiller Home Price Index Sends Mixed Message for May

Author:  Rob K. Blake        Published: July 28, 2008

The Case Shiller Home Price Index released today will get a lot of media play touting the worst price drop ever for the month of May stating a 15.8% decline. However, a deeper look at the data tells a different story.

The AP is reporting,

“The Standard & Poor’s/Case-Shiller 20-city index dropped by 15.8 percent in May compared with a year ago, a record decline since its inception in 2000. The 10-city index plunged 16.9 percent, its biggest decline in its 21-year history.

No city in the Case-Shiller 20-city index saw price gains in May, the second straight month that’s happened. The monthly indices have not recorded an overall home price increase in any month since August 2006.”

Here’s a video how the media will present these numbers…

Even though this is true, it’s not the whole picture. In a volatile market, year-over-year statistics are not as important as month-over-month numbers. In other words, the numbers from April to May in the same year are more telling than May to May putting 12 months in between.

Therein lies the mixed message.

Many cities have seen month-over-month home prices increases painting a much rosier picture. The chart below shows both types of statistics published by the Case Shiller Home Price Index and we see cities like Denver, Atlanta, Dallas, and Portland, all had increases in home prices when viewed month-over month.

Data provided by Standard and Poor’s

The media will report the sensational yearly numbers, but that is hardly relevant since most of these 20 markets were at or close to their highs a year ago meaning even if we weren’t in a housing meltdown, one would still expect a drop off the all-time highs.

Now even though some of these markets are increasing in housing prices we can’t yet get too excited since we are also in the heart of the home buying season. Seasonality could be the reason for the increases and we return to dropping prices by the fall.

But in the “doom and gloom” housing market it’s nice to see something positive even if it’s only temporary.

Here’s a video interview of Mickey Levy of Bank of America and Kevin Cron of Putnam Investments explaining the Case Shiller in a more analytical light rather than the sensational mass media take…enjoy!

Good Luck!

PS: I reviewed the same statistics of the Case Shiller Home Price Index last month on the April numbers and you can read that post called, Home Values - Have We Hit Bottom Yet?, and you’ll see Denver numbers were up then too…two consecutive months of higher prices for Denver.

Author: Rob K. Blake