Monday, December 17, 2007

Tracking Home Price Trends with S&P/Case-Shiller

The S&P/Case-Shiller Home Price Indices keep track of home prices in 20 major metropolitan areas. Data go back as far as 20 years for some markets.

I wanted to compare a couple of markets, one that is experiencing a bubble and one that isn’t. Los Angeles is a good example of a bubble while Atlanta shows no bubble whatsoever.

By placing a 10-year moving average on the charts, you can see how far prices in Los Angeles have moved from the average. For the past year and a half or so, prices have started to decrease, forming a clear downtrend. Because of this I would not be a buyer in the Los Angeles market. Granted, some neighborhood in Los Angeles might still be doing ok. But overall it is not an attractive market yet, not until prices have bottomed out and resumed an upward trend.

Atlanta home prices on the contrary are keeping steady with their 10-year moving average. The trend has been up for as far as the data go (January 91). For this reason I would consider being a buyer in the Atlanta market, but a cautious buyer. Considering that home price trends can differ greatly from one neighborhood to the next, I would check whether or not the neighborhood has experienced a healthy, unbubbly growth over the past 10 years.

Does anyone know any website with reliable historic home price data at the neighborhood level?


grantnlee said...

Have you seen this site?

It was founded by the same Case and Shiller guys that you used for your charts. I have not tried it but I think their subscription service will let you get detailed data at the neighborhood level...

Dave said...

Enjoy reading your blog. Good job on your net worth.