Did Case Shiller miss the double dip?

I know you are interested in the housing market and I wanted to pass this article on for your review.  Lee Adler is a long time investor and wonderfully analytical in how he approaches his own real estate investments.  In this post he discusses how S&P Case Shiller Home Price analytics are a little behind the times on reporting.  Mr. Adler believes the true barometer the list price to sales price truly indicates current market activity and price strength/weakness.  He still warns of inflation and bank held inventory but believes the double dip market has passed.

The current list price to sales price ratio average for single family homes in  San Jose is 98%
(Based on Sales since January 2011 to now)

Here is an excerpt from the article by Lee Adler: (or Complete article link)

“There’s just one problem with that. Other price indicators that are not constructed with the Case Shiller’s large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com’s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow’s listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.”

“Another weakness which the Case Shiller shares with all price measures is that they do not account for the false price reports resulting from the two home-buyers’ tax credit programs in 2009 and 2010.  Aside from the fact that the credits distorted the market by pulling demand from the future and induced people to buy who may never have otherwise been in the market, the buyers did not pay what the sales prices reflected. You as a taxpayer, via Uncle Sam, contributed $6,500 to $8,000 of the purchase price. As a result of that, the amounts that buyers actually paid were overstated by that amount.”

“The Wall Street Journal originally reported the evidence of this uptick in early April (Are Home Price Declines Easing?).”

“A criticism of using listing prices is that they do not represent actual transaction values. Sellers may be unrealistic. However this data has correlated well over time with subsequently revealed sales data. Sellers have been so beaten up in recent years that they have become more realistic about where there offerings should be priced. Spreads between listing prices and sales prices don’t vary that much over time. Therefore the listing price data is usually a good barometer of current conditions. Sellers get instant feedback from their agents about market conditions, and their pricing has been a good barometer  of that.”

“This is the only real time barometer we have, and it has proven to be reasonably reliable. It told us immediately last August that the market was cracking. That reality was not revealed in the conventional    pricing measures until late October-November news releases, and the true depth of the decline wasn’t revealed until February and March of this year. By then the decline was apparently ending. Now we are seeing evidence that prices have bounced since February.”

For more local housing trends, check out Home Values.  You can select specific neighborhoods and see trends.
Of course, if you have questions, let me know.  I am here to help you with your real estate decisions.

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