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
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. This chart shows that better.
Inflation-Adjusted – Case-Shiller Home Price Index
Researching The Bubble?
This graph shifts the base year back from 2000 to 1995 so you can see the whole bubble cycle from beginning to end.
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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