Finding the number: Estimates of home price can vary widely
It’s that time again.
Home price season.
In the last few days, real estate watchers have been treated to a feast of new numbers, the very latest data on where the housing market is heading.
It comes in a flurry every month about now, reports from the National Association of Realtors, the Federal Housing Finance Agency, something called the S&P Case-Shiller Index, and a host of lesser known outfits like First American CoreLogic, Trulia and Zillow.
And it can be enough to make your head spin.
Tuesday, for instance, Case-Shiller reported that home prices nationwide were up in the second quarter by the most in three years, but they’re still down 14.9 percent from last year. FHFA, however, said prices fell in the second quarter versus the first quarter, but were down just 6.1 percent year-over-year. Earlier this month the National Association of Realtors reported median prices down 15.6 percent from last year, to $174,100.
"There are lots of different indicators," said Richard DeKaser, president of Woodley Park Research in Washington and former chief economist at National City Corp. "And they’re not always in harmony."
These numbers matter because they influence what we think our home is worth, how much we’ll sell for and how much we’ll pay to buy one. And they matter because they’re the closest thing we have to a real-time readout on the housing market, which many say must show signs of life if the broader economy is to recover.
So how will we recognize those signs?
Actually, housing economists say, the various reports will start to look like they’re looking now, with the arrows pointing more or less upward, or at least less down.
"The housing market probably hit bottom this spring and is now in the early stages of a recovery," DeKaser said. "With each month we’ll get more data to either confirm or refute it. I’d say within a couple of months we ought to have a more firm picture."
Still, the reports all say slightly different things. Because they’re all asking slightly different questions.
The Realtors, for instance, track the median price of homes sold by their members nationwide. The median is the point at which half of homes are sold for more, and half for less, and it can be skewed by what’s on the market.
Right now, there’s a lot of homes being sold at bargain prices because of foreclosures, and a lot to first-time home buyers, who tend to spend less. Higher-end homes are moving slowly. Since cheaper homes make up more of the market, they’re pulling that median down — in the St. Louis region it’s off 10.1 percent over the last year.
The FHFA index tries to count repeat sales — how much a home that sold for, say, $250,000 in 2004 would sell for today. But it’s based on data collected from lending giants Fannie Mae and Freddie Mac, and doesn’t count so-called "jumbo loans" — anything above $417,000 in St. Louis. So, experts say, it can underestimate market shifts.
Case-Shiller also measures repeat sales, but it can have the opposite effect, overestimating swings at the high end. That’s because it weights sales by the price of the home. In its formula, a $500,000 house counts significantly more than a $250,000 one. And its 20-city index, which doesn’t include St. Louis, is skewed toward pricier coastal markets.
"In a sense they’re apples and oranges," said Kevin Kliesen, an economist at the Federal Reserve Bank of St. Louis.
Most economists recommend splitting the difference, and tracking other indicators like building permits, inventories of unsold homes and foreclosure rates.
But, real estate agents note, most homeowners don’t have that kind of time, or a Ph.D. in economics. Often, they’ll just catch a headline. Or maybe check out one of the many websites, like Realtor.com or Zillow, that try to estimate what a house is worth.
"That can set a false expectation," said Shawn Kelsey, general manager of the Kelsey Group Realtors in Chesterfield.
Indeed, Kelsey occasionally plugs his Ballwin three-bedroom into a half-dozen of those sites, just to see what they say.
Earlier this month, Realtor.com told him the house was worth $203,252. Home Gain came in nearly twice as high: $402,030. When he compared those numbers to February, three websites said his house had gained value. Three said it had lost.
"Who does the buyer choose to believe?" Kelsey said. "Who does the seller choose to believe?
"Whichever one benefits them the most."