Three Months Ago, The Housing Market Was Already Recovering

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The housing market appears to have bounced off its bottom. A firm recovery is already underway.

Detroit Leads The Housing Recovery

Standard & Poor’s released its latest Case-Shiller Index this week. It showed that, on an monthly basis, half of the tracked markets improved between July and August.

On an annual basis, however, just two markets are showing higher price points as compared to year-ago levels. Home valuations in Detroit and Washington, D.C. showed improvement between August 2010 and August 2011, rising 2.7% and 0.3%, respectively.

The other 18 markets remains affected by 2011′s weak winter months, but the Case-Shiller Index has been moving in the right direction. 

Since bottoming out in March, it’s up nearly 4 percent.

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The Flaws Of The Case-Shiller Index

The Case-Shiller Index gets a lot of press, but it’s important that we remember the product’s flaws. There are 3 of them.

The first Case-Shiller Index flaw is its small sample size.

Although it’s positioned as a national housing index, Case-Shiller data represents just 20 cities nationwide. They’re not even the 20 most populous U.S. cities, either. 

For example, cities like Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10) are excluded from the Case-Shiller Index findings where cities like Minneapolis (#48) and Tampa (#55) are not.

A second Case-Shiller Index flaw is the way in which it measures home price changes.

The Case-Shiller Index formula ignores all home sales except for “repeat sales” of the same home. New homes don’t count for the Case-Shiller Index, condominiums don’t count for the Case-Shiller Index, and neither do multi-family home sales. 

In cities such as Chicago, condos account for a large percentage of monthly sales.

And the third Case-Shiller Index flaw is that the data is reported on a 2-month lag.

It’s nearly Halloween, yet we’re still discussing August housing market data. A lot can change in two months in housing — and it usually does. The October market conditions may be similar to those of August, but it’s not so similar you can make a decision to buy or sell based upon it.

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Get Real-Time Mortgage Rates

The Case-Shiller Index is “delayed” and incomplete. It’s more for politicians and economists who take a longer view of the economy. For everyday buyers and sellers, you need real-time data instead. Get that from a real estate agent.

And when you’re ready for a mortgage rate, get that in real-time, too. Right here.

Click here for a mortgage rate quote at today’s rates.