Last week's economic news came from a variety of sources. Most significant was the Fed's Federal Open Market Committee statement after its meeting ended Wednesday. The statement indicated that the Fed saw moderate economic growth. FOMC did not taper its purchase of MBS and Treasury securities.The FOMC statement announced the committee's intention to closely monitor economic and financial developments "in the coming months," which suggested that the FOMC is taking a wait-and-see position on reducing its $85 billion monthly asset purchases.
Home value rose to close out the summer, according to the S&P/Case-Shiller Index, a national home-valuation tracker.
Nationwide, values rose 0.9% between July and August 2012 with 19 of 20 tracked markets showing improvement. Only one tracked city — Seattle, Washington — showed a decrease, falling just 0.1 percent.
On an annual basis, 17 of the 20 Case-Shiller Index markets improved, led by Phoenix. Home values in the Arizona city are up 18.8 percent from August 2011. The next closest city in terms of home price gains is Detroit, Michigan at 7.6 percent
We should temper our excitement for the August Case-Shiller Index, however. Although it suggests an ongoing U.S. housing recovery, the methodology of the Case-Shiller Index is far-from-perfect. In fact, one could argue that the index is more effective for policy-makers than for actual buyers and sellers of real estate.
There are three reasons for this :
- The Case-Shiller Index tracks home prices of single-family homes only. Multi-unit homes are excluded.
- The Case-Shiller Index can be distorted by “discounted” home sales (e.g.; foreclosure, short sale).
- The Case-Shiller Index publishes on a two-month delay — data is hardly current.
Beyond the above three points, however, the Case-Shiller Index falls short in another area — it ignores the basic tenet of housing that “all real estate is local”. In using 20 cities to represent the entire United States, the Case-Shiller Index reduces more than 3,100 municipalities into a single “market”.
Even within its 20 tracked cities, the Case-Shiller Index fails short as a housing market barometer. This is because — even within cities — home values vary. Some zip codes perform better than others. The Case-Shiller Index can’t capture markets with that level of detail.
National housing data helps in spotting broader trends of growth but provides very little for today’s active buyers and sellers of real estate who need “real-time” data. For that, talk to a local real estate agent.