Question Details

Matt Dolling…, Real Estate Pro in 60611

Do people really know what data is covered in the Standard and Poors Case Schiller Report? Might want to?

Asked by Matt Dollinger, 60611 Fri May 16, 2008

read the fine print....

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5
That's true. It ignores condos, which are up to a record 15.2% vacancy rate. (with new records being set every quarter for a while now.)

As such, if you're relying on the C-S index to give you market data, you should know that it's going to give you overly optimistic results in major metropolitan areas.
3 votes Thank Flag Link Fri May 16, 2008
Yes.

And it is by far, the best index for judging how housing is going. I wish it included condos also, but alas, nothing is perfect. I also which you could get a breakdown of smaller areas, but alas again, nothing is perfect and using monthly data, you'd probably get data with meaningless confidence intervals if you got down too small. I also wish it could account for seller concessions which are masking even larger problems, but nothing can do this as it not recorded. By excluding condos and not being able to include seller's concession, its making the housing recession look at lot milder than it really is in many areas.

Zack
3 votes Thank Flag Link Fri May 16, 2008
Matthew Doll-

Repeating sales are the only reliable way to tell how much housing values have changed.

If you have a better proposed methodology, you could make your entire career by publishing it, but a whole lot of extremely smart people have worked to solve these problems, and to date the best available data comes from C/S for metropolitan areas and from OFHEO for rural areas. And both of these indices use repeated sales for valuation.

Also, it's true that C/S ignores condos, but that's because C/S is specifically an index on the value of single family homes. Since condos aren't single family homes, they're not counted. It's a shame there isn't a similar C/S Condo index and a combined C/S All Housing Index, but that doesn't make C/S weak.

Mostly I'm just dumbstruck by your arrogance. The idea that ten minutes of your insight was somehow more accurate than decades of continuing research by separate individuals in both the government and private sectors who did, in fact, have access to data on every sale, yet came to the independent conclusions that the existing indexes served as accurate proxies for value.

Hopefully you'll come back down to earth, and realize that your post was basically worthless. As it stands, you're like a guy who disproves the moon landing by pointing out that the flag was waving.
2 votes Thank Flag Link Fri May 16, 2008
First, you're EMPHASIS on " AT LEAST 2 TIMES TO ACTUALLY BE COUNTED" is wrong. Builder-> First homeowner->2nd homeowner is two arms-length transactions, so it would be counted. If someone built their own house, that it would need to be sold again, but that is rare, in major metropolitan areas its almost non-existant.

Second coming into play here, is statistical significance. 52% of the data is a HUGE sample from which to draw conclusions about the market. Given 52% of the data in a sample, you can get an extremely accurate view of the market. For instance, when doing polls before elections, they poll about 3,000 people to give estimates of 2 million people, and their confidence interval is with 3-4% of the actual value. If they were to poll 1.1 million people, the interval would be basically 0, meaning the poll had nearly 100% confidence. If we had the standard deviation of the increases being measured by C-S we could find the actual number of houses need to get an answer at 99% accuracy, but it is safe to assume it would be a lot less than 104,404.

When doing a CMA of a house for a client that is buying a 30 yr old single family home, do you use a brand new custom home as a comparison? In all the CMAs I've received, new construction, if included, is pointless because its not apples to apples, its not even fruit to fruit. So why shouldn't an index that is looking at price changes exclude these? It would be irresponsible not to. Excluding Condos is a problem, but not in the sense you wish. Its actually very helpful for realtors trying to claim things aren't as bad as they seem since their vacancy rate is insane right now. Plus this article just appeared in the Chicago Tribune: http://www.chicagotribune.com/classified/realestate/chi-wed-… which at the Q1 rate of sales, is saying you have 7 and 1/2 years of condos coming onto the market this year alone. If condos were included, and I think they should be, the declines would be much greater in a number of areas.

Between this post and your response in the thread about negative press in Chicago, you seem to believe that because the data does not include certain items, it can't be accurate. This just isn't true, and the fact that it pulls in such a sizeable sample of the market just reinforces the accuracy of their information (I have chosen to use the term information).

So to answer this: "does this report still hold any weight for an area like the Chicagoland Market... or ANY MAJOR METROPOLITAN MARKET? " the answer is ABSOLUTELY.

Zack
2 votes Thank Flag Link Fri May 16, 2008
Thanks for your answers... it was kind of question just to see how much faith was put in this incomplete data. To give you a little insight into what this report is omitting.

2007 Recorded Closed Data for all of MLSNI (attached, detached, resale and New construction)
* Data pulled Directly from MRED formerly MLSNI*

198,106 transactions
$63,000,000,000 in volume

Single Family Resales Recorded

104,404 Transcations (52% of all MLSNI Volume in 2007)
$34,000,000,000 in Volume (53% of all MLSNI Volume in 2007)

Condos, Townhomes, and New Construction in 2007

93,702 Transaction Sides (47% of all MLSNI Volume for 2007)
$29,000,000,000 in (46% of all MLSNI Volume for 2007)

So... with HALF of the overall MRED (formerly MLSNI) volume not being counted (and we have not included the fact that a resale property has to have been sold or transferred AT LEAST 2 TIMES TO ACTUALLY BE COUNTED, does this report still hold any weight for an area like the Chicagoland Market... or ANY MAJOR METROPOLITAN MARKET?

Me thinks not... do your own research.

See the link below for the actual FAQ from the S&P website as to what they include in their data (I have chosen not to use the term information...)
0 votes Thank Flag Link Fri May 16, 2008
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