Why Key Housing Indexes don't Agree

Daily Real Estate News February 15, 2008

Why Don't Key Housing Indexes Agree?
Tracking housing values is harder than tracking stocks, and for many home owners who are watching their biggest investment decline, it is more painful. The two ways to track home prices are the Office of Federal Housing Enterprise Oversight's index and the gloomier Standard & Poor's Case/Shiller index, analysts say. Both are based on a concept, developed in the 1980s by Karl Case of Wellesley College and Robert Shiller of Yale University, that looks at repeat sales of the same houses.OFHEO's index says home prices rose nationally by 1.8 percent between the third quarters of 2006 and 2007. But the S&P/Case-Shiller national index of home prices was down 4.5 percent in the same period. This discrepancy persists even though both barometers avoid distortions that occur in other widely cited measures, including avoiding fluctuations caused by the sale of high-priced homes.What causes the discrepancy? The bottom line is economists can point to some differences, but overall they don’t know what causes the gap. And as some analysts have pointed out, with any luck, by the time they figure it out, we’ll be out of this slump and won’t care any more.