Bloomberg David Blitzer, managing director and chairman of the Index Committee of S&P Dow Jones Indices.
The last Tuesday of every month has a particular significance for housing market-watchers. That’s when the monthly index of house prices known as “Case-Shiller” is released.
The report has a long history that can be uncovered with a dive down the internet rabbithole of discussion about how Yale Professor Robert Shiller initially stitched together the data for the index, cobbling together various data sets from multiple sources across centuries – yes, centuries.
But even casual economy-watchers know the Case-Shiller brand. It’s the granddaddy of housing data. Hurricanes can disrupt sales and mortgage rates can be skewed by freaky bond-market action, but house prices reflect supply and demand, the macro and the micro, all in one. Plus: what’s more natural than wanting to know the value of our biggest assets?
Also see: House price gains lurch to a 20-month low, Case-Shiller says
A closely watched report naturally prompts lots of interest. Nearly every month, MarketWatch gets asked some variation of “Why isn’t Houston in the index?” from a reader or a tweeter. (Often not far behind is “What about Philadelphia?”)
They’re fair questions. Those two cities are the fourth- and fifth- biggest in the U.S., respectively, and Houston has spent the past several years taking in tens of thousands of people leaving other cities – most notably those that anchor the 20-city index.
Also see: America’s new great migration in search of lower property taxes
So MarketWatch decided to ask the authority. The report now bears the somewhat unwieldly official title of “S&P CoreLogic Case-Shiller 20-city Composite,” because it’s managed by S&P Dow Jones Indices, the company that considers itself the specialists of commercializing financial indexes. David Blitzer is chair of the firm’s Index Committee.
Blitzer confirmed for MarketWatch that the 20 cities that make up the index is, essentially, a historic accident. Texas wasn’t as hot in the late 90s when Robert Shiller and Karl Case developed the index concept. S&P Dow Jones took over in 2006, just as the housing bubble was reaching its peak, and there was great national interest in Sunbelt cities like Miami, Tampa, Phoenix, and especially, Las Vegas.
But even more importantly, unlike most states, Texas doesn’t allow public access to deeds, which is one of the easiest ways to populate an index with sales data, in order to derive prices. So Blitzer and his team struck a deal with a Dallas-based Realtor association to get data from their multiple listing service.
“And when it was all put together, the decision was that was a bit of a hassle, so we’d stick with one city,” he said. Also, “we had Boston, New York and Washington so we decided that was enough for the Northeast, with apologies to Philadelphia.”
“If we were doing it today, we’d probably do it a little differently. I don’t have a list in my back pocket, but I’m sure we’d look for other ones,” Blitzer said. He sees the cities that make up the Case-Shiller index as no different than the stock selections that make up an index like the S&P 500 SPX, -0.66% . “It gives you a very good picture of what’s going on,” he said.
Also read: Housing is the least affordable in 10 years — here’s what’s to blame
That doesn’t mean homeowners should think of houses like stocks, to be traded regularly, Blitzer said. “Not that I think you should trade your stock portfolio every day either. We’re in the business of ‘buy the S&P 500 and don’t sell it,’” he added with a laugh.
Still, Blitzer said, “If somebody’s about to sell their house they ought to have a lot more information than what they’re going to get from the Case-Shiller index.”
What the index does offer home owners a sense of the overall national housing market, trends in their area versus others, as well as a solid read on household balance sheets — vital because housing is such a big part of most Americans’ wealth.
For real housing-data geeks, Blitzer noted that there is a way to trade futures contracts for the original ten cities considered for the index. Over the years, he and his team have fielded lots of proposoals for ways for homeowners to hedge home values, “but it never seems to check out in the marketplace,” Blitzer told MarketWatch. “I think it is a little too much financial engineering.”
Further reading on Case-Shiller, home prices, and more
Many of the men involved in the original Case-Shiller project have gone on to illustrious, or at least numbers-heavy, careers in housing. In 2016, MarketWatch profiled Alan Weiss, one of a few folks experimenting with ways to share an owner’s home equity, and trade it as an asset.
MarketWatch also spoke extensively with Terry Loeb, who founded home-price forecaster Pulsenomics, late last year, about the difficulties of estimating price changes since the financial crisis.
The Real Estate Center at Texas A&M is developing its own home-price indexes with the Texas Association of Realtors, a “repeat-sales” index like Case-Shiller, for the four major metro areas of the state and a few smaller metros.
Finally, Philadelphia and its housing market are doing just fine, with or without Case-Shiller, thank you very much.
Related: We’re probably at peak housing. Here’s what that means.
