Housing Indexes: What Are Home Prices Doing?

by: Eddy Elfenbein

Calculated Risk has a great post looking at the differences in housing price indexes. As an admitted indexaholic (my name is Eddy, and I’m…), I’m afraid I have to resign myself to the fact that it’s basically impossible to come up with one simple index of house prices.

The Case-Shiller Index has a monthly gauge of prices in 20 major markets. There’s also a quarterly national index. Calculated Risk writes, “OFHEO covers more geographical territory, OFHEO is limited to GSE loans, OFHEO uses both appraisals and sales (Case-Shiller only uses sales), and some technical differences on adjusting for the time span between sales.”

The numbers from Case Shiller have been much gloomier recently. The reason is that lower-priced and non-GSE homes have fallen faster, which is probably because the lending standards were questionable.

As long as home prices were rising, all the lending problems were invisible. Now that prices are falling, the problems are accelerating. The difficulty we’re having is that we’re not exactly sure what home prices, in aggregate, are doing.