Commentators speak of numerous broad housing indicators and indexes tracking property values across the nation. However, Real Estate, unlike Stocks and Bonds, are not fungible. Properties are non-homogenous and are affected by both broad economic macro and local micro factors. Due to market inefficiencies, the usefulness of data derived from these broad indicators is limited. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Constant Quality vs Traditional Valuation Measures In compiling housing stats, people typically look at several factors including overall volume, average price, number of bedrooms and baths, and price per sq ft, while adjusting for seasonality. Data from all homes within a certain property type or market area are included. Issues arise when homes of greater/lesser quality, size, or type are sold within a given period of time. The average price of a typical four bedroom home might appear to rise when in reality, the houses sold in the past year were significantly newer/renovated or of higher quality. Constant quality indexes have been used to measure the change in prices of the same house over a period of time. Certain steps are taken to minimize the effect of sales of improved homes and homes sold between relatives. While this appears to give more accurate results, several issues remain. The role of new construction within a market area and buyer migration can skew results. OFHEO and the S&P Case/Shiller Index provide quality control data The Office of Federal Housing Enterprise Oversight compiles data on conventional conforming mortgage transactions from the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). The House Price Index (HPI) utilizes a modified version of the weighted repeat sales methodology proposed by Case and Shiller. The benefits of OFHEO's HPI are that the data utilized encompasses a broad stream of data and includes additional areas that the S&P Case/Shiller Index leaves out. The data source for the Case/Shiller Index is derived from Public Records while the HPI utilizes data from single family residential property with at least 2 mortgages originated and subsequently purchased by either Freddie Mac or Fannie Mae since Jan 1975. It is important to keep in mind that data on multi unit, attached properties, government insured loans, and property exceeding conforming loan limits are excluded. This index is updated quarterly. It would be prudent to look at broad market indicators and statistics published by the S&P, OFHEO, and the National Association of Realtors, understand the different methodologies in which they analyze their figures, and then investigate the myriad of factors that influence a property both from a macro and micro level.