How Do You Measure Home Values?

By MAAR on Friday, April 4th, 2008

With both the local and national housing markets experiencing prolonged, downward pressure on home values for the first time since The Great Depression, everyone and their mother is understandably curious about just how much less their home is worth this year, if at all. So the dataheads and number-crunchers and economists who make it their business to understand the inner mechanics of the housing market are suddenly finding their work in high demand. To think, after all these years it’s finally sexy to be able to explain the role of shifting supply and demand dynamics on price (thank God I actually paid attention in undergraduate-level Econ 101).

We’re all collectively turn our eyes towards measurements of home values, trying to squeeze out any semblance of a realistic picture of how what is likely the largest asset in our personal wealth portfolios is fairing. We look at OFHEO Quarterly Appreciation figures, NAR Median Sales Price figures, Case-Schiller Index figures—whatever we can get our hands on. And while each tends to paint a relatively similar picture, they all seem to provide a different number.

Realistically, none of these methodologies is perfect—at least not yet. Each has their own inherent limitations. The Case-Schiller Index has started to receive a good deal of notoriety and, some believe, deservedly so, due to their focus upon comparing values of the same kind of house, year-over-year—rather then a marketwide median price comparison.

But there are some chinks in the Case-Schiller armor that are worth talking about. One of our very own members, Pat Paulson from Exit Lakes Realty, has posted some excellent thoughts on this very subject in a blog post called "The Case Against Case (Schiller)." Take a look at it by clicking here.


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