Case Shiller housing index numbers have been released for May 2008, and once again, the headlines tell a different story than the reality. If you scanned a few of today’s articles you might not be blamed if you thought that home prices had plummeted 16% this past month. The drop, of course, is versus 2007, not versus April 2008, and is old news at this point. But some journalists, and more than a few bloggers still can’t resist casting out the old “Home Prices Plunge 16%” reader bait.
The actual Las Vegas numbers show a 2.9% decrease in average prices over the April 2008 numbers. While the index has still not leveled off, the May numbers are a significant improvement over the drops in November ’07 through March ’08.
When looking at Case Shiller indices it’s important to remember two facts:
1. A significant number of the home sales the index is currently measuring are foreclosures, which are skewing the indexes lower. When these forced sales at abnormally low prices finally work themselves through the market we should expect to see the index start to rebound fairly quickly as more “normal” sales are reflected.
2. The index lags the market very significantly. The numbers Case Shiller calls “May ’08” are actually taken from a three month rolling average of sales for March, April, and May. With market uncertainty at or near an all-time high, March may very well have been the real low.