If you keep up-to-date with the news, chances are that have come across the Case-Shiller Index; in fact, if you pay any attention to US real-estate, I am sure you would have heard of it repeatedly in the news (it comes out the last Tuesday of each month at 9am EST – there is a two-month lag time in the data that is reported). You may have heard of it, but do you actually know what it is? Did you know that it isn’t even one “index”??
It was developed in the 1980s by the economists, named Allan Weiss, Karl Case and Robert Shiller. In order to sell their research, they formed a company which was later purchased by Fiserv, Inc. Fiserv tabulates the data, and Standard & Poor distributes the data.
The index, officially known as the S&P/Case-Shiller home-price index, is not one index, but 23 indexes.
Check out what SFGate has to say about all of the different indexes:
“The national home price index, which covers nine major census divisions. It is calculated quarterly and published on the last Tuesday of February, May, August and November.
The 10-city composite index, which covers Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, DC.
The 20-city composite index, which includes all of the above cities plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland (Oregon), Seattle and Tampa.
Twenty individual metro area indexes for each of the cities listed above.”
So, what does it actually measure? Check this out from SFGate:
“Each index measures changes in the prices of single-family, detached residences (also known as houses) using the repeat-sales method, which compares the sale prices of the same properties over time. New construction is excluded – since these houses have not been previously sold, there is no way to calculate how their sale prices have changed until they have had two owners (at which point they are no longer new construction). Condos and co-ops are not included in any of the major indexes; however, there is a separate condo index that tracks condo prices in five major markets: Boston, Chicago, New York, Los Angeles and San Francisco.”
Why does it matter?
Of course… if you are looking to buy or sell, you want to know if prices are going up or down!
If you have any concern for the economy, and want to monitor how it is performing, then this index is a worthy indicator (especially looking at specific geographical locations).
And, a home is a huge purchase, and thus home-price movement will have a significant impact on the value of your portfolio.
So… The big question… what do we have in Canada??