There's Something You Should Know About The Case-Shiller Housing Number

Robert Shiller

January Case-Shiller house price data comes out today.

Analysts expect a 3.8% annual drop, according to

That’s a little less worse than the 4% drop for December, but it’s still weak. Note that all the housing data lately has been a bummer.

But there’s a key thing to realise about Case-Shiller numbers, and that’s that they’re very lagged.

Calculated Risk wrote about this yesterday…

But remember that the purchase agreement for a house that closed in November was probably signed in September or early October. So some portion of the Case-Shiller index will be for contract prices 6 or even 7 months ago! 

Other house price indexes do a little better. CoreLogic uses a weighted 3 month average with the most recent month weighted the most – and they will release their February index next week, almost a month ahead of Case-Shiller. The LPS house price index is for just one month (not an average) and uses only closings (not recordings like other indexes that can add an additional lag). 

But the key point is that the Case-Shiller index will not catch the inflection point for house prices until well after the event happens. Just something to remember …

Still, the Case-Shiller index is the gold standard of housing data, and the folks behind the index today (Robert Shiller and S&P’s David Blitzer) make a good case for its usefulness.

Our Sam Ro talked with both of them in January on this matter:

David Blitzer, Managing Director and Chairman of S&P’s Index Committee, told Business Insider that there is indeed a lag between the time a price is agreed on and when the sale closes.  However, he thinks a six month lag may be on the high side.  We asked Blitzer about Caron’s assessment. Here’s how he responded:

The analyst is correct about one point — prices for S&P/Case-Shiller (SPCS) are based on public filings. However, these are the only consistent, reliable and accurate source of price data. Further the time from contract to closing is more like 4 to 8 weeks, not 3 to 6 months. Also, many sales collapse before the sale closes and the only way to be sure the sales is arms length is through the public records of closings.

We also spoke to Professor Robert Shiller, co-creator of the Case-Shiller index, who shared Blitzer’s sentiment:

Our indices are based on closings. But I think that is the right thing to do. Many purchase and sales agreements are never consummated. Those that are away from the market are less likely to be completed. Using purchase and sales agreements to construct an index would be like taking limit orders on the stock exchange to compute a stock price index as if they were transaction prices.

Blitzer and Shiller both make good points about practicality.  Like Blitzer said, “these are the only consistent, reliable and accurate source of price data.”

So it’s a high-quality number. But it alone won’t help you call the turn.

Then umber will be out at 9:00 AM ET, and we’ll have live coverage here.

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