Amidst the usual journalistic hyperbole of “plunges” and “steep falls” in the SF Chronicle were some very interesting statemnents on the nature of the Case-Shiller index.
“Prices are dropping […],” said Patrick Newport, U.S. economist with Waltham, Mass., research firm Global Insight. That said, he and others believe the index may be overstating the extent to which average homes already have declined in value.
Case-Shiller is a repeat sales index, meaning it tracks only the actual price gains or declines for homes that have traded hands at least twice. In the current market, the homes that have done so recently increasingly tend to be foreclosed properties, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.
“It’s biasing the numbers in a way that makes it look a lot worse than it really is for the typical homeowner,” Rosen said. “I’m a bear, so I’d go with it if it were true.”