I just updated the Case-Shiller charts and wanted to explain why they’re the best way to follow general home price trends in the 20 metro areas that have Case-Shiller charts.


Here’s the problem. You’re starting to think about selling your house and you want to get a feel for whether home prices are going up, down or sideways in your area.

The occasional story you pick up on the radio, TV or newspaper makes it sound like home prices are really going up fast but you weren’t really listening at the time. Now that you’re thinking of selling, you look into home price trends on the internet and find so much different information, you end up confused.

An important part of preparing to sell or buy a home is to see home price trends in your area.

Why You Need to Know Home Price Trends

Pricing your home for sale. If local home prices are increasing rapidly you can set your asking price higher than the recent sales of comparable homes.

If home prices are falling, however, your house should be priced cheaper than comparable homes for sale, otherwise, it won’t sell and you’ll ride the market down. Remember 2008? You want the house to sell ASAP before it loses any more value.

In a normal market, however, home prices will have a slow upward trend. If that’s the case for you, you usually want to price the house just a little bit above its current value.

When to sell. If home prices are going up fast in your area and you don’t have to sell right away, you could put off selling for now to see if prices go any higher.

Waiting to sell in a hot market could be to your advantage but only if you plan to move to a different city where home prices are not increasing as rapidly.

If you plan to sell a home but also buy another home in the same area at the same time, it doesn’t matter whether home prices are going up, down or sideways. Any gain you would make by waiting to sell in a hot market, you’ll lose by waiting to buy. It’s a wash. Don’t worry about home price trends, just sell and buy whenever you want to.

Buyers. For home buyers, especially first-time home buyers, slow and steadily increasing home prices can make you feel secure in buying your first home. If you buy a home in a normal, slowly increasing market, it’s likely the home will continue to appreciate slowly, at least for the short and medium term.

If home prices are rising rapidly, however, it’s a double-edged sword. On the one hand, you want to move fast and buy ASAP before prices go any higher. On the other hand, you want to be cautious and make sure you aren’t buying near the top of a bubble. That’s a tough one to figure out but you should at least study in detail the home price trends in the area.

And, of course, if prices were falling, you would probably want to wait to buy.

News Stories are Often Misleading

For some reason, a high percentage of real estate news stories are feel good stories about rising home prices.

The saying goes about TV news that, “If it bleeds, it leads” but for real estate, reporters tend to look the other way unless it’s a positive story.

I don’t know why. Maybe it’s because real estate companies advertise a lot and they complain to newspaper, TV and radio stations about non-positive stories.

Maybe it’s because real estate businesses are only sending reporters positive stories. They must send out press releases on the flimsiest positive news. I’ll sometimes see stories about home prices being up for only one month. One month! I never see stories about home prices being down for only one month.

Verify. Don’t trust. Right now home prices are skyrocketing in a few cities, including Miami and Denver, but they aren’t in many other cities, including Cleveland and Chicago. In both cases, however, most real estate news stories are likely to be positive. Take “home prices are increasing” stories with a grain of salt and do your own research to verify.

Tips

  • Ignore stories from other cities. If a story isn’t about your local real estate market, ignore it. Stories about the overall U.S. real estate market? Ignore them. Go to my Case-Shiller charts and start comparing different cities. Look at the huge variations in home price trends from city to city. That’s why you have to look at data specifically for your area. Start with your city to get the big picture and as you get closer to selling, fine tune your research to look at trends in your town, zip code and, ultimately, in your neighborhood.
  • Don’t look at just one month. A lot of misleading stories focus on price increases in one month. It doesn’t matter how much home prices increased last month versus the month before or even the year before. Monthly data jumps all over the place month to month and last year’s price is old news. If you want to see where the real estate market is headed, look at the home price trend over the last several months. Last month is too short and last year is too old.
  • Look at the Case-Shiller Home Price Index charts to get an accurate view of home price trends. It’s simple. Just look at the charts. Are prices going up, down or sideways? It’s hard to be manipulated by statistics when you can see with your own two eyes the recent home price trend. The Case-Shiller charts give you a very accurate view of home price trends up to about 2 or 3 months ago.

When you’re just starting to plan to buy or sell a home, the best way to see the overall home price trend in your metro area is to look at Case-Shiller charts, if you live in one of the 20 cities covered by Case-Shiller. Don’t overthink it. Don’t be swayed by news stories or real estate agents. Just look at the charts to get a feel for your city’s home price trends as a whole.

As you get more serious about selling, you definitely want to zero in on recent home price trends in your specific town, zip code and, ultimately, neighborhood. That’s a post for another day but a good place to get started is to focus on the median sale price charts at http://www.zillow.com/home-values/.

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See all “How to Price Your Home” posts here.


Compare Case-Shiller Home Price Index and Median Price

Case-Shiller Home Price Index vs. Median HOme Price
Case-Shiller Home Price Index vs. Median Home Price
Case-shiller home price index - PHoenix, arizona
Case-shiller home price index – Phoenix, arizona
Median sold home price - Phoenix, arizona

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