You may have heard the Case-Shiller Housing Index mentioned on the news. But what exactly is it, and why should you care?
Contrary to its name, but Case-Shiller Housing Index is actually several indexes, including the national home price index, the 10-city composite index, the 20-city composite index, and twenty individual metro area indexes for the cities included in the 20-city composite index.
Aren’t you glad we cleared that up? [insert eye roll here]
Alright, let’s break it down.
National home price index—this is a quarterly index [published in February, May, August, and November], which covers the nine major census divisions, as pictured below.
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| Nine Major US Census Divisions |
10-city composite index—this includes Washington, DC, San Francisco, San Diego, Miami, Los Angeles, Las Vegas, Denver, Chicago, and Boston.
20-city composite index—this includes all the cities in the 10-city composite index, plus Atlanta, Cleveland, Charlotte, Dallas, Detroit, Minneapolis, Portland, Seattle, Tampa, and Phoenix.
All of these indexes except the national index are published on the last Tuesday of each month. There is a two-month lag with each publication, so, for example, the August publication only includes information through June.
Each index measures changes in the price of single-family homes, by comparing the difference between the most recent sale price and previous sale prices.
The purpose of the index is to show whether home prices are going up or down, and by how much. Here’s why the Case-Shiller housing index is relevant to you—if you’re trying to sell your home, but the index shows that housing prices are going up, you might want to wait to sell. If you’re buying, you might want to hurry up so you can get a good deal. If the index shows housing prices going down, you’ll want to hurry and sell so you can get the highest sale price possible, and if you’re buying, you might want to wait for a better deal.
But what if you aren’t in the market to buy or sell a house? Is the index still relevant? Yes, because the Case-Shiller housing index is an indicator of how the economy is performing overall. For example, the index shows whether or not people are confident enough in the economy to make an expensive purchase. Much of the way the economy performs is a result of the way people expect it to perform, because generally people’s actions follow their expectations. But that’s another post…
