Who's Telling the Truth? (a look at different home price indexes)

Written By:
Ingo Winzer, President

Local Market Monitor

 

Whose home price data should you believe? The National Association of Realtors says home prices in the past year were up 11 percent. Case-Shiller says the increase was 9 percent. The FHFA says 7 percent. And the FHFA purchase and refinance index, which we use, says 2 percent.

Each of these sources has weaknesses. The Realtors report the median price, which can change if a different mix of homes is sold. Case-Shiller mainly has data from large cities and uses county records that include foreclosure sales. The FHFA indexes exclude cash sales and non-conforming mortgages, and report older data.

If we want to know how much the value of the average home has changed, I think the FHFA purchase and refinance index is the best bet right now, because it includes a smaller percent of foreclosure sales, which have very little to do with the average home. The Realtors report that 25 percent of home sales in the first quarter involved foreclosures.

 During normal times, the four indexes line up pretty well, but these are not normal times.