The Case-Shiller Home Price Index is the most accurate way to look at home price appreciation in a city, between cities and nationally.

The price of homes in January 2000 is given the value of 100. So a Case-Shiller value of 200 means home prices have doubled since January 2000. (To see the Index in real, inflation-adjusted terms, scroll down.)

Using an index of home prices instead of the actual dollar price makes it easier to compare home price appreciation between the 20 cities.

Case-Shiller Home Price Index

Not all cities have data all the way back to 1987. Phoenix and Minneapolis data start in 1989, Seattle starts in 1990, Atlanta and Detroit start in 1991, and Dallas data only starts in 2000.

3-Month Markers
Case-Shiller Home Price Index

Case-Shiller numbers are 3-month moving averages so the January number is really the November-January average. What Case-Shiller calls “January” numbers should really be called “December” numbers because they represent November-January sales. This chart shows that better.

Inflation-Adjusted
Case-Shiller Home Price Index

Note: I applied the Consumer Price Index for All Urban Consumers (CPI-U) to the Case-Shiller Home Price Index.

12-Month Change
Case-Shiller Home Price Index

Researching The Real Estate Bubble?

The graphs below shift the base year back from 2000 to 1995 so you can see the whole bubble cycle develop from beginning to end.

A paper by Ferreira and Gyourko (2011) shows the real estate booms in some cities started in 1997-1999 and grew slowly for a while before taking off.

I wanted to see how the booms developed from the very beginning so I moved the Case-Shiller baseline year back to 1995 from 2000.

The authors of that study consider a jump in prices as the beginning of a housing boom. That is, if prices have been increasing at around 3% a year for a few years and then they jump to 6% in one year, that jump is the beginning of the boom.

1995 Baseline
Case-Shiller Home Price Index

Note: Sorry but Case-Shiller doesn’t have data for Dallas before 2000 so I can’t shift the base year back to 1995 for Dallas.

1995 Baseline
Inflation-Adjusted
Case-Shiller Home Price Index

Note: I applied the Consumer Price Index for All Urban Consumers (CPI-U) to the Case-Shiller Home Price Index.

1990 Recession

When I set the baseline back to 1990, it’s easy to see how the 1990 Recession affected house prices. It took a lot of metros a lot of years to get back to 1990 prices.

If you move the date slider at the bottom of the graphs back to 1987, you can see that when the 1990 Recession started, the S&L real estate bubble peaked in California and DC. Home prices in Boston and New York were falling before the 1990 Recession started.

The S&L bubble was centered on commercial real estate but it also affected residential house values in some metros. For more, check out this post, What The 1990s Tell Us About The Next Housing Bust.

For fun, be sure and check out Denver and Portland home prices during the 1990s.

Note: Case-Shiller has data back to 1990 for 17 of its 20 cities but not for Dallas (starts in 2000), Atlanta and Detroit (both start in 1991). Data for 14 metros go back to 1987, Phoenix and Minneapolis start in 1989, and Seattle in 1990.

1990 Baseline
Case-Shiller Home Price Index

1990 Baseline
Inflation-Adjusted
Case-Shiller Home Price Index

The Problem with the Case-Shiller Home Price Index

It’s not perfect but the Case-Shiller Home Price Index is a more accurate measure of home price changes than either average or median home price because the Case-Shiller Index looks at changes in the sales prices of individual homes over time.

However, the Case-Shiller Index has one big problem – it’s SLOW.

We won’t get the January numbers, for example, until the end of March and then the January numbers are really the November-January numbers because Case-Shiller uses a 3-month moving average. So what Case-Shiller calls “January” numbers should really be called “December” numbers because they represent November-January sales.

We usually get the average and median home price data soon after the end of a month which is an advantage. However, the average and median numbers jump around a lot from month to month which makes it harder to see changes in price trends.

In addition, average and median home prices are more affected by the mix of homes sold. When, for example, more luxury homes are sold for any reason (say, a strong stock market), the average and median home prices will increase even if the underlying home values haven’t changed a cent.

The S&P/Case-Shiller Index, however, is value-weighted, so more expensive homes have a greater influence on estimated price changes.

Despite running 3 months behind, the Case-Shiller Home Price Index remains the most accurate measure of home price appreciation.

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