Click To See Today's Rates

Posted 04/26/2016

Case-Shiller Index: Typical U.S. Home Price Rises 36.3% Since 2012

Case-Shiller Index: Home values rise past last decade's peak

Home Values Rising Quickly This Decade

Home values continue to rise nationwide.

According to Standard & Poor's Case-Shiller Index, home values made another year-over-year increase in February, highlighting what many of today's buyers have already discovered the hard way -- it's getting harder to find "cheap housing".

Since reaching a bottom in 2012, home values have climbed more than 36% nationwide.

These higher home prices may be one of the reasons why, according to the National Association of REALTORS¬ģ, more than 3-in-10 buyers are first-time home buyers.

Current mortgage rates are down and national rents are rising. It's often less costly to purchase a home than to rent one.

Plus, it's getting simpler to save for down payment.

In today's market, there are abundance of low- and no-down payment mortgages -- including the recently-introduced HomeReady‚ĄĘ mortgage, which allows just 3% down.

There are more ways to get into a home cheaply than during any period this decade.

Click to see today's rates (Jul 23rd, 2016)

Portland, Seattle Up More Than 10% Annually

Standard & Poor's recently released its February 2016 Case-Shiller Index.

The Case-Shiller Index tracks home price changes both from month-to-month, and from year-to-year, in select cities nationwide.

Tracked cities include San Diego, California; Los Angeles, California; and Phoenix, Arizona.

As compared to the year prior, home values are higher in all 20 tracked markets, led by an 11.9 percent gains in Portland, Oregon; and double-digit gains in Seattle, Washington.

The "weakest" of the Case-Shiller Index cities was Washington, D.C.. Home values in the nation's capital rose just 1.4 percent over the prior 12 months. Values in Chicago rose just 1.8%.

Despite the relative strength of today's housing market, home buyers should use caution when referencing the Case-Shiller Index as part of a personal "buy or rent" decisions.

The monthly index is flawed and may push you toward improper conclusions.

The index's first flaw is its most obvious -- its limited sample set.

Click to see today's rates (Jul 23rd, 2016)

Flaw 1 : Not Enough Cities Included

The Case-Shiller Index tracks 20 U.S. metropolitan markets and brands itself a national index. Yet, according to Wikipedia, the U.S. is home to more than 3,100 different municipalities.

This means that the Case-Shiller Index tracks fewer than one percent of all U.S. cities.

Furthermore, its 20 tracked cities tracked aren't even the nation's 20 most populous. Four of the 10 most populous U.S. Cities -- Houston, Texas; Philadelphia, Pennsylvania; San Antonio, Texas; and San Jose, California -- are notably absent from the Case-Shiller Index 20-City Composite.

By contrast, smaller cities such as Minneapolis, Minnesota (#48 in population) and Tampa, Florida (#55 in population) are not excluded.

The "national" Case-Shiller Index, in other words, is not very national at all.

Even on a city-by-city basis, the Case-Shiller Index gets it wrong. This is because the index lumps disparate city neighborhoods into a single, city-wide reading.

In Chicago, for example, some neighborhoods definitely out-gained others.

Values in Lincoln Park and Lakeview change differently from values in Wicker Park and Bucktown, just as values in Manhattan and Brooklyn differ in New York City.

Flaw 2 : Too Few "Home-Types" Included

A second Case-Shiller Index flaw is its methodology.

The index considers only "repeat sales" of the same home in its findings, and those homes are required to be single-family, detached properties. This means that condominiums, multi-family homes, and new construction are not included.

In some cities, these "excluded" property types account for a large percentage of total monthly sales.

New York City meets this criteria with its heavy concentration of condos and co-ops, as does Chicago, Boston, and, to a lesser extent, Los Angeles whose footprint extends into Orange County.

With its limited property type set, Case-Shiller captures only a portion of the overall housing market.

Click to see today's rates (Jul 23rd, 2016)

Flaw 3 : Data Too Aged To Be Accurate

A third Case-Shiller Index flaw is the "age" of its data.

Because Standard & Poor's publishes on a 60-day delay, the Case-Shiller Index is reporting on a housing market that no longer exists. But, the data is even older than that.

Home sales tracked by the February Case-Shiller Index include an average of three months of home sales data. This means that home sales data from December, January, and February are lumped together to find a single result; and, because homes can take 60 days or more to close, the index results are based on contracts written as far back as October.

In other words, the Case-Shiller Index is telling us about sales from as many as 7 months ago.

That's of little help to home buyers today.

It's 2016 and the U.S. housing market is different from what it was two seasons ago. Mortgage rates are different, global markets are different, and even the Federal Reserve's monetary policy is different.

This seven-month lag time may not matter much to economists and policy-makers and other people taking a long-view of housing economics. But, to an individual buyer or seller of a home, that time lag renders the index close to useless.

What Are Today's Mortgage Rates?

The Case-Shiller Index will never be your "real-time" real estate indicator. However, it can highlight valuation trends, and the trend is toward higher values nationwide

Take a look at today's real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.

Click to see today's rates (Jul 23rd, 2016)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

3 Testimonials

Sarah M. Office Manager

The Mortgage Reports has been an invaluable resource to me -- it helped me to pick the sweet spot to refinance. Thanks!

Thomas D. Software Developer

As a first time home buyer, The Mortgage Reports has been the only voice that I can trust, and the expertise has been helpful.

Marie M. Real Estate Agent

I have been a Realtor for more than 30 years and enjoy The Mortgage Reports. It's terrific to learn something new almost every day.

2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)