May 24, 2012
Home price indices — why they differ
24 May 2012
Posted by Andrew Kantor
Excellent post from Trulia’s chief economist on why different indices of home prices seem to vary — one may go up a lot while another goes down a little, or vice-versa.
Looking at house-price-change data from Case-Shiller, CoreLogic, the Federal Housing Finance Agency, NAR, and Trulia can give you very different pictures of the housing economy.
These indices often show different trends even for the same time period. Some of the differences among these indices are well-known, such as the fact that FHFA’s traditional index is based on transactions involving conforming, conventional Fannie Mae & Freddie Mac mortgages, while other indices (including the newer FHFA expanded-data index) cover a broader set of homes.
But other, more technical differences help account for why some indices go up while others go down, including how they handle:
• The mix of homes listed and sold.
• Seasonal patterns in home prices.
• Weighting of homes and metros.
If you’re a stats junkie — or just interested in understanding why you should take any housing number with a grain of salt — it’s a worthwhile read.