Two Housing Price Indices: One Up, the Other Down

The Case Shiller home price index goes down while the Federal Housing Finance Agency’s house price index goes up. The diffences highlight the pitfalls of measuring the industry too closely.

Palm Coast, FL – November 29, 2011 – The September S&P Case-Shiller home price index shows a price drop of .6% from August and a 3.6% drop when compared to 2010. September prices fell in all but three of 20 metropolitan areas measured by Case-Shiller. The report, released today, also says house prices have returned to 2003 levels. The Case Shiller index covers major metropolitan areas, comprising half of all U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The September data is the latest available.

Another report, also released today, by the Federal Housing Finance Agency indicates house prices rose; .2% from the second quarter of 2011. The reports are not as contradictory as they seem. While the FHFA release is headlined "U.S. House Prices Rise 0.2 Percent in Third Quarter 2011," the body of the report reveals a third quarter drop of 3.7% from the third quarter of 2010; consistent with Case-Shiller.
The FHFA’s HPI is calculated using purchase-only home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages.
“In most regions of the country, third-quarter home values were relatively stable, even in some areas that experienced sharp price declines in preceding quarters,” said FHFA Principal Economist Andrew Leventis. “While most housing markets still face stiff headwinds, the fact that some beleaguered states—such as Idaho, Florida and Utah—saw quarterly price increases is a positive development.”
It will be interesting to see how the media reports this news over the next 24 hours. Will they spin the positive or the negative side? Will we read about stability or slight price increases (this year) or continued price declines (compared to last year)?
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