S&P Case-Shiller Home Price Index: Your Home Is Still Pretty Much Worthless

The S&P/Case-Shiller home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S.  This index is based off of repeat transactions meaning it tracks the same homes from month-to-month and is calculated as a 3 month moving average to smooth out the volatility in the series.  The index is published with a two month lag so timeliness is a factor.   The latest report can be located here. 

This quarterly index captures approximately 75% of U.S. residential housing stock by value and covers single-family home prices for the nine U.S. Census divisions. In addition, the 10 and 20 city composite indices also measure single family home prices and are calculated monthly. Furthermore, the condominium indices track condominium prices in Boston, Chicago, Los Angeles, New York, and San Francisco. 

The repeat sales methodology used for the monthly index can be found here:

"The repeat sales methodology measures the movement in the price of single-family homes by collecting data on actual sale prices of single-family homes in their specific regions. When a home is resold, months or years later, the new sale price is matched to its first sale price. These two data points are called a “sale pair.” The difference in the sale pair is measured and recorded. All the sales pairs in a region are, then, aggregated into one index. Sales pairs are carefully screened for any data points that would distort the index, such as non arms-length transactions."

In layman's terms::

"The monthly S&P/Case-Shiller Home Price Indices use the “repeat sales method” of index calculation – an approach that is widely recognized as the premier methodology for indexing housing prices – which uses data on properties that have sold at least twice, in order to capture the true appreciated value of each specific sales unit."

Here is Detroit's depressing HMI:

Nationwide home prices seem to be improving:

"Data through April 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that annual growth rates of all 20 MSAs and the 10- and 20-City Composites improved in April compared to March 2010. The 10-City Composite is up 4.6% from where it was in April 2009, and the 20-City Composite is up 3.8% versus the same time last year. In addition, 18 of the 20 MSAs and both Composites saw improvement in prices as measured by April versus March monthly changes."

But this is not true because these numbers still reflect the effects from the home buyer tax credit.  Because of this next months release should shed some more light on the true state of home values.