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The Case-Shiller Index is a home price gauge, published by private researchers.  Using data from public records, the index compares recent sales prices on single-family homes to the last-known sales prices of those same homes, compiling the results  into a monthly report.

For example, if a home at 1060 W Addison in Chicago sold for $200,000 in 2008 and then again $250,000 in 2009, the Case-Shiller Index would say the home changed by 25% annually.

According to the March 2009 Case-Shiller Index report, home prices are down by nearly 19 percent nationwide.  Or, at least, that's the story the press is running with.  It makes for good headlines, but the data can be misleading to the average homebuyer in Cincinnati or Chicago or elsewhere. 

Home buyers shouldn't really care about annual price appreciation -- they should care about monthly price appreciation.  As in, I've been looking for a home for the last 30 days -- are home prices trending higher while I'm in the process?

When you look at the monthly Case-Shiller data, it paints a different picture.  Yes, home values are down in a broad perspective, but on a month-to-month basis, the pace of decline is slowing.  15 of 20 markets covered by Case-Shiller Index either improved, stayed flat, or declined by 0.2 percent or less. 

 Numbers like that are a lot less scary than today's papers' headlines.

All of this notwithstanding, however, because of its methodology, the Case-Shiller Index remains flawed and imperfect.  Most obviously, the report only figures home price data from 20 cities across the country.  The 20 cities, you'll note, aren't even the  20 most populated ones.

• Houston is omitted from Case-Shiller.  It ranks #4 in population.
• San Antonio is omitted from Case-Shiller.  It ranks #7 in population.
• San Jose is omitted from Case-Shiller.  It ranks #10 in population.

Tampa, however, as the 54th most populous city, is included.

Secondly, the Case-Shiller Index is not a "real-time" report.  It's two months lagging.  May's report is a study of March home prices and a lot can happen in a 2-month period.  For example, in the last 60 days, mortgage rates fell to new all-time lows and the first group of buyers using the $8,000 first-time home buyer tax credit program have written sales contracts on homes. 

This data is not reflected in the May Case-Shiller Report.

And lastly, we can't ignore the Case-Shiller Index's irrelevance as a home value gauge because because home values can't be summarized on the city-level any more than they can be summarized on a country-level.  Each real estate market has its own character and flavor, broken down into areas, neighborhoods and street. 

There's a different appeal to living in Mason, Ohio versus Hyde Park, Cincinnati, Ohio, most locals would know, but Case-Shiller would lump them together anyway creating a false expectation for buyers in both areas.  The best way to know what local home prices are doing is to talk with a skilled real estate agent in your area who has access to real-time data. 

If you want a referral in your home market -- .

Despite its flaws, however, the Case-Shiller Index is still important.  It helps to identify broader trends in housing and housing is expected to lead the economy out of recession.  Therefore, watching the Case-Shiller Index can provide foresight into the timing of an economic inflection point.

After 2 straight modestly-mild reports, we may be nearing that point now.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.