CS Index post average 15.8% drop in home prices 3 posts by 2 users

Posted: 07/29/2008 at 08:38AM

Michael,

You're instinctive response to buy is a good one - it shows you're thinking like an investor.

A quick comment on the Case-Schiller Index data, with an interesting illustration.

The Case-Schiller Index (CSI) as you know is actually made up of three sets of data, a 10-city composite, a 20-city composite, and a much larger one. Their monthly data releases (like today's) are based on the 10 and 20 city composites. The CSI is oft criticized as its coverage scope is quite narrow, and the media typically assumes that the CSI data represents the entire housing market.

Here's an example of why that's not true. We've been researching Houston for an article we're writing. I and a couple of my team were on the phone with brokers in Houston most of the day yesterday.

Averaging the broker reported single family median price from yesterday, including July data, we were told the median Houston home price has risen to $174,900. If that is accurate, then the median price has risen an average of 7.5% annually over the past three years, and is up 15.2% 2007-2008 so far. Impressive.

One of the most trusted sources for real estate data in Texas is Texas A&M's Center for Real Estate Research. They report that Houston's median home price was $151,400 as of June. If that is accurate, then Houston's median home price has risen an average of 2.3% annually over the past three years, and is only down 0.2% 07-08.

My point - while the CSI data is elegantly constructed, it is indeed very limited in scope and does not represent what's happening in all markets. Given information we were provided yesterday (over thirty brokers) - Houston is looking far better than any market in the CSI data released today. Taking a macro-view of real estate is a dangerous exercise for investors - you have to drill down market by market to have things make sense, and to find the real treasures out there today.

BTW - I've enjoyed your even hand as a moderater, you obviously have good experience and insights to share. Keep up the good work.

Mark