{"id":2556,"date":"2008-03-14T09:42:45","date_gmt":"2008-03-14T09:42:45","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2556"},"modified":"2025-03-27T15:48:36","modified_gmt":"2025-03-27T15:48:36","slug":"us-house-prices-is-case-shiller-exaggerating-the-gloom","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2556","title":{"rendered":"US house prices: is Case-Shiller exaggerating the gloom?"},"content":{"rendered":"<p>According to the Case-Shiller national index, US home prices peaked in the second quarter of 2006 and had fallen by 10% by last year&rsquo;s final quarter. By contrast, the Office of Housing Enterprise Oversight (OFHEO) purchase-only index was essentially unchanged over the same period. Why the divergence? <\/p>\n<p>Both indices are based on a repeat-sales methodology. They use different underlying data &ndash; deed records of residential sales transactions in the case of Case-Shiller and mortgages purchased by Fannie Mae and Freddie Mac in the case of the OFHEO &ndash; but the most likely explanation for the divergence is that the Case-Shiller index is value-weighted, so is more affected by price movements of expensive housing. <\/p>\n<p>This difference in construction implies that Case-Shiller should be a better guide to changes in aggregate housing wealth but OFHEO is more representative of the price experience of the typical home-owner. <\/p>\n<p>The chart below compares the two indices over a longer time-frame. Recent weakness in the Case-Shiller index is the counterpart of much greater strength during the boom period. Case-Shiller climbed 69% in the five years to the second quarter of 2006, while OFHEO was up 47%. Even after its recent hefty drop, Case-Shiller is still ahead of OFHEO since the latter&rsquo;s inception in 1991. <\/p>\n<p>Bears argue that the loss of wealth implied by Case-Shiller will prompt significant consumer retrenchment. If OFHEO is correct in suggesting the average home-owner has so far experienced only a modest decline, however, the effect could be smaller than feared. OFHEO would also suggest a lower estimate of the number of households currently in negative equity. <\/p>\n<p><span class=\"full-image-float-none\"><img decoding=\"async\" style=\"width: 500px; height: 300px\" alt=\"US_House_Prices_Q1_1991.jpg\" src=\"\/storage\/US_House_Prices_Q1_1991.jpg\" \/><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to the Case-Shiller national index, US home prices peaked in the second quarter of 2006 and had fallen by 10% by last year&rsquo;s final quarter. By contrast, the Office of Housing Enterprise Oversight (OFHEO) purchase-only index was essentially unchanged over the same period. Why the divergence? Both indices are based on a repeat-sales methodology. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2556","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2556","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2556"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2556\/revisions"}],"predecessor-version":[{"id":4865,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2556\/revisions\/4865"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}