What the Case Shiller Report is Actually Telling Us
Case Shiller released their latest Home Price Index yesterday. The headlines that followed were true but, in our opinion, a little misleading. Here are some of the highlights of the report that have dominated major media coverage:
- Home prices rose 5.5% in the 12 months ending in November 2012 (the latest data available).
- In the 12 months ended in November, prices rose in 19 of 20 cities.
- Housing is clearly recovering. Prices are rising as are both new and existing home sales.
Great news for the housing industry. Realize however that all the highlights mentioned above refer to year-over-year comparisons.
What is NOT Being Reported
There is another finding in the report that hasn’t garnered many headlines – month-over-month prices are softening.
There is no doubt that prices are up over the same time period last year. However, home price movement is seasonal. During the winter months for each of the last three years, prices have softened. That is taking place again this winter. As the report states:
“Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer.”
This does not mean the housing recovery is slowing. It just means that home values are following their historic trend. As explained in the report:
“The better annual (year-over-year) price changes also point to seasonal weakness rather than a reversal in the housing market.”
If you are thinking of selling, you really need to know what will happen to home values in the short term. Prices, based on history, will soften over the next several months in many markets. Therefore, if your plan is to move by next summer, waiting for higher prices before putting your house on the market may not make sense.