The Case-Shiller Home Price Index is the most accurate way to look at home price appreciation in a city, between cities and nationally.
The price of homes in January 2000 is given the value of 100. So a Case-Shiller value of 200 means (nominal) home prices have doubled since January 2000.
Using an index of home prices instead of dollars makes it easier to compare home price appreciation between cities.
Case-Shiller Home Price Index
3-Month Markers – Case-Shiller Home Price Index
Case-Shiller numbers are 3-month moving averages so the January number is really the November-January average. This chart shows that better.
Inflation-Adjusted – Case-Shiller Home Price Index
Note: I applied the Consumer Price Index for All Urban Consumers (CPI-U) to the Case-Shiller Home Price Index.
Researching the Great Real Estate Bubble?
Check out this graph that shifts the base year back from 2000 to 1995 so you can see the entire bubble cycle in one chart.
The Problem with Case-Shiller
The Case-Shiller Index is a more accurate measure of home price appreciation than either average or median home price because the Case-Shiller Index looks at changes in the sales prices of individual homes over time.
However, the Case-Shiller Index has one big problem – it’s SLOW.
We won’t get the January numbers, for example, until the end of March and then the January numbers are really the November-January numbers because Case-Shiller uses a 3-month moving average. So what Case-Shiller calls “January” numbers should really be called “December” numbers because they represent November-January sales.
On the other hand, we usually get the average and median home price data soon after the end of a month. That data, however, jumps around a lot from month to month which makes it hard to see changes in price trends.
In addition, average and median home prices are more affected by the mix of homes sold. When, for example, more luxury homes are sold for any reason (say, a strong stock market), the average and median home prices will increase even if the underlying home values hadn’t changed a cent.
The S&P/Case-Shiller index, however, is value-weighted, so more expensive homes have a greater influence on estimated price changes.
Despite running 3 months behind, the Case-Shiller Home Price Index remains the most accurate measure of home price appreciation.
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