Interesting City-by-City Case Shiller analysis (4%, sales, housing, percentage)
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It's a city-by-city breakdown of 1. When a city peaked. 2. What percent it's dropped from peak. 3. How much of the total drop occurred in the last 12 months.
Here's an example:
"Seattle, 10 percent decline from peak reached in July 2007, 97 percent in last 12 months"
"Boston, 12 percent decline from peak reached in September 2005, 45 percent of that decline in last 12 months"
It gives you (perhaps) a sense of whether the declines in a given area are slowing or accelerating. For those who don't know, Case Shiller compares same-house repeat sales. Case Shiller "cities" are actually broad metropolitan areas, including their suburbs.
Pretty interesting that everytime this comes up at least few sane souls remark in a rationale way...
I'm not sure I understand what you mean here. The comment you linked to seemed to be complaining that the author chose to write about changes in house prices in an article where the topic was changes in house prices. How is that a sane and rational complaint?
Basic problem with Case-Schiller is MASSIVE amount of MASSAGING they admit to doing with their collected data. They are pretty open about WHY they do it, because otherwise their report would be TOTALLY out of sync with what buyers & sellers are actually likely to encounter. I even understand the BASIS for some their massaging (attempting to eliminate non-arms length sales, properties that are LIKELY to have been significantly upgraded or damaged, sales non-representative of neighboring properties) BUT they also admit they simply do not have the ability to verify more than a TINY fraction of their assumptions.
THAT is what ought to be reported on -- the fact that Case-Schiller themselves know they "cook the books".
Now, the trends they report may be valid (top of my head I think that the actual backward looking percentage declines they cite are pretty close to accurate) but they may just be lucky. Frankly the rate of decline numbers seem far from likely -- when a property moves in big way it is almost by definition not a 'normalized' situation -- every sale becomes its own outlier .
In my experience of four decades of real estate investing and sales, there is a natural discontinuity between any individual transaction and the overall rate / direction of change. The most desirable properties sell far more quickly and at far better prices in both rising and falling markets while the undesirable properties always take much longer to sell and sell at a much depressed price regardless of market. It is not a bell curve, it is often a situation where the activity at the 'tails' dramatically impact PERCEPTION.
Further, the multiple differences that buyers do perceive in even very similar properties often are a much bigger influence then the 'trend' in the market -- if Case-Schiller realizes this they make no effort to comment on it, instead pretending that their data massaging makes housing prices look much more like a commodity. For them to admit that EMOTION is the single biggest factor in housing prices would be to admit that they cannot make any valid prediction...
So am I reading that correctly in that the bulk of the decline percentage happened in the last year vs over the period of time measured ?
Yes, he is basically saying that although declines in many markets have already been going on for at least a couple of years, the rate of that decline is increasing with the majority of the decline taking place in 2008.
Of course it would have been nice to see my city (Philadelphia) on that list to see where we stand, but you can't have everything!
Basic problem with Case-Schiller is MASSIVE amount of MASSAGING they admit to doing with their collected data. They are pretty open about WHY they do it, because otherwise their report would be TOTALLY out of sync with what buyers & sellers are actually likely to encounter. I even understand the BASIS for some their massaging (attempting to eliminate non-arms length sales, properties that are LIKELY to have been significantly upgraded or damaged, sales non-representative of neighboring properties) BUT they also admit they simply do not have the ability to verify more than a TINY fraction of their assumptions.
So basically, they do their best to make the data accurate, but they can't be 100% sure it's absolutely correct every time. And for that, you accuse them of actively trying to deceive people with their reports :
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THAT is what ought to be reported on -- the fact that Case-Schiller themselves know they "cook the books".
Trying to account for the realities of the market is not "cooking the books" in any sense of the word, and no responsible reporter would characterize it that way. There's nothing dishonest or underhanded about removing data that is known to be bad or unrepresentative of the area as a whole. You might disagree with specific details of how they do this, but to do that you'd need to actually mention specific details you understand and disagree with instead of just calling S&P a bunch of liars.
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Now, the trends they report may be valid (top of my head I think that the actual backward looking percentage declines they cite are pretty close to accurate) but they may just be lucky.
The correlation with other independent price indexes isn't luck.
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Further, the multiple differences that buyers do perceive in even very similar properties often are a much bigger influence then the 'trend' in the market -- if Case-Schiller realizes this they make no effort to comment on it, instead pretending that their data massaging makes housing prices look much more like a commodity. For them to admit that EMOTION is the single biggest factor in housing prices would be to admit that they cannot make any valid prediction...
If emotion was the biggest factor in housing prices, this bubble never would have ended.
There's lots of FUD here, but I don't see any serious suggestion about specific cases where the index is wrong or better ways to do it. Using a single number to represent a whole market is never going to tell the whole story, but that's true no matter what measure you use. To suggest that this limitation means that the Case-Shiller numbers are just random guesses, or better yet, fraudulent, is just irresponsible.
Just thought I'd add an individual experience for comparison's sake. I'm about an hour away from Charlotte, where it says the peak was August 2007, and prices have fallen about 4% since then.
I bought my home in April 2007, and I just sold it for approximately 4% less than we paid for it. So, at least in my case, it rings pretty true!
Case-Schiller is like every other data selling service -- they want to convince people that they have 'special insight' or more advanced analysis or some greater predictive abilities. They don't. If I want to get data about what a median house in any zip code lists for and subsequently sells for I can get that from MLS. Very cheap, no massaging, no secret sauce.
I have run down chapter and verse on problems in the Case-Schiller methodology before, and the bottom line is they have NO predictive value. The efforts of S&P to sell the data as something magical is no different than the efforts of JD Powers to sell their data on automotive matters. Nor it is particularly different than the rating agencies (of which S&P is one...) efforts to make-up the AAA ratings on MBS. All such data selling services are thoroughly discredited -- one need only open ones eyes to see the evidence of the errors...
Looking backwards is EASY, looking forward is pretty close to impossible. I mean seriously, the same sorts of inputs that Goldman Sachs analysts used to predict $200/bbl oil is exactly the kind of foolish extrapolation that Case-Schiller does. Don't get me wrong, I don't have any use for the forward looking stuff from NAR either. Just too many variables.
For goodness sake this time yesterday the NOAA web site was predicting 12.2 inches of snow at ORD, actual snowfall totals were less than HALF that. NOAA is dealing in HARD SCIENCE with purely numeric inputs, using bias free computer models and they can't get within a 50% error bar and I'm supposed to bow down on the alter of a couple onery economists with a half baked model? Puhleaze...
You're bashing Case-Shiller as inaccurate, and yet promote using median price to measure price changes in an area? At least the various repeat sales indexes try to account for changes in the mix of houses sold from month to month or year to year. Ignoring the problem of a changing mix of houses sold doesn't make that problem go away. I'd much rather have an honest attempt to correct for this problem instead of ignoring it entirely and using median price data.
Quick example for you. The latest median price for the Bay Area of CA shows prices are at 2000 levels again. Case Shiller's latest report puts them at May 2003 levels instead. The latter is able to correct for the fact that not many high end houses are selling. The median just ignores this fact and assumes that all house sales are interchangeable. Which one would you rather use?
And nothing in this article, the Case-Shiller data, or anything in this thread has anything to do with looking forward or predicting, so that's a red herring.
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