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[Interview] Robert Shiller PHD, Yale Professor of Economics, Case Shiller Index, Irrational Exuberance

June 15, 2009 | 12:01 am | | Podcasts |

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[The Housing Helix Podcast] Robert Shiller PHD, Yale Professor of Economics, Case Shiller Index, Irrational Exuberance

June 14, 2009 | 10:46 pm | | Podcasts |


Professor Robert Shiller took time out from his busy schedule when he was in New York to pay me a visit and let me interview him for The Housing Helix Podcast.

I invited him after I read his recent Op-ed piece in the New York Times, Why Home Prices May Keep Falling.

Dr. Shiller is well known for many things, including his New York Time’s bestselling book: Irrational Exuberance and his widely referenced monthly state of the housing market tool, The Case-Shiller Index. But he also continues to write about the housing market, having released two books over the past two years:

Last year’s The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It

and this year’s

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

I hope you enjoy his insights.

Check out this week’s podcast.

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.


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S&P/Case-Shiller Home Price Indices – 20 City Year-over-Year % Change

The chart, "S&P/Case-Shiller Home Price Indices - 20 City Year-over-Year % Change" is only available for Miller Samuel Insiders


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Explainer: Three Ways to Look at S&P/Case-Shiller Index Results

August 25, 2015 | 2:00 pm | Charts |

I have a long history of dissing the relevance of the S&P/Case Shiller Index because of the 6 month lag and the slew of anecdotal link-the-dot official commentary associated with it that literally has nothing to do with the numbers generated (gasping for air). However I feel compelled to look at it periodically because it is part of the media’s monthly market report gauntlet.

The S&P/Case-Shiller Home Price Indices were published today so I thought I’d create a trifecta of ways to look at the same data.

Top Chart – This is the famous year-over-year % change view which I believe is the best way to look at the market and the scariest. They use the seasonally adjusted index and the non-seasonally adjusted index (so did I) but there is virtually no difference. Most news coverage of the index usually link to the press release which embeds this type of chart that uses all the broad indices: 10-city, 20-city and National. The 20-City has long been the primary index that was touted but the references in the media are shifting to the national index and that’s probably a good thing.

Middle Chart – This is the month over month version using the same data. Clearly the seasonal adjustment smooths out the line. However the non-seasonally adjusted versions shows a significant impact from the seasonal nature of real estate – in fact this chart shows that seasonal patterns are becoming more extreme since the financial crisis began. Originally the index was virtually all about the month over month results even though the featured chart was year-over-year. They have since moved year-over-year to the front of the press release and has already influenced the way the index is presented in the media which is good to see.

Bottom Chart – This is the only chart that uses the actual index numbers rather than percentages. It’s a sleepy pattern that seems to wash out seasonality a bit and shows the market in a less intimidating way. Ironically, the actual index trend is visually less interesting. Seems ironic.

8-25-2015CSI
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Pulling the Case-Shiller Index Back by 6 Months to Reflect Actual Buyer/Seller Behavior

May 27, 2014 | 10:45 pm | Charts |

matrixCSIshift-5-27-14
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The Case Shiller Index was released today and it continued to confuse consumers, pundits, economists etc…and for good reason. It’s 6 months late.

I wondered what would happen if their index result was pulled back by 6 months to see how it lined up with a couple of significant housing milestones (purple vertical lines). The most recent housing milestone was last year’s Bernanke speech that resulted in the spike in mortgage rates in May-June of 2013.

In the modified trend line (dotted blue) housing prices surge up until mortgage rates spike. This is clearly more logical than the actual index showing housing prices surging for six months after the mortgage rate spike.

In the earlier milestone in April 2010, the adjusted index (dotted blue line) immediately begins to slide after the April 2010 signed contract deadline passed to qualify for the federal homeowner tax credit as part of the stimulus plan. Yes, that’s exactly what happened on the front lines.

I’m going to call this new methodology “time-shifting a housing index.” From an historical perspective, this is a much more useful and reliable trend line. For the near term, it places the CS HP 6 months behind the market without any relevance to current conditions. Then again, the S&P/Case Shiller Home Price Index was never meant to be a monthly housing indicator for consumers as it is currently used by the media. It was originally created to enable Wall Street to hedge housing but never caught on because of the long time lag and therefore the eventual ability of investors to accurately predict the results.


The top chart is fairly self-explanatory but here’s the math again:

  • May 2014 Report Publication Date
  • March 2014 Data (Jan, Feb, March Closings – February is midpoint)
  • January 2014 Contracts (Nov, Dec, Jan Contracts – December is midpoint)

Contracts Assumes 90 days between closing date and “meeting of minds” between buyer and seller i.e. 75 days from contract to close +15 days to signed contract from “meeting of minds.”

“Meeting of Minds” Moment when buyer and seller agree on basic price and terms, usually a few weeks before contract is actually signed i.e. May 2014 Case Shiller Report = December 2013. The optimal moment to measure housing.

Here’s a regular chart that has a longer timeline, with and without seasonal adjustments (you can see that seasonal adjustments are essentially meaningless.)

matrixCSI-5-27-14

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Case-Shiller Index 20 City Non-Seasonally Adjusted Time-Shifted to Reflect Actual Buyer/Seller Interaction

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Case-Shiller Index: Home prices post largest gain in a decade, just not in NY

Housing prices surged nationwide in March, but growth in the New York area lagged behind, according to Case Shiller Index data released Tuesday.

One reason for sluggish local growth was that prices here didn’t fall as much as more speculative markets did during the crash. Experts also cited the impact of a shrinking Wall Street, New York’s long foreclosure process, and superstorm Sandy.

Nationally, prices rose in March by 10.2 percent compared to a year earlier. That gain was the highest annual return since 2006, when the housing market was peaking. The biggest growth was in Phoenix, San Francisco and Las Vegas, where year-over-year increases topped 20 percent.

In the New York area — defined as a 29-county region that includes Long Island — prices rose by 2.6 percent, the smallest gain among 20 metropolitan areas covered by the index.

Prices on Long Island actually slipped in the first quarter from a year earlier, according to data published last month from a different source. The median Island home price, excluding sales in the Hamptons and on the North Fork, fell 2.6 percent, to $341,000 from $350,000, according to real estate appraisal firm Miller Samuel Inc.

The uneven recovery speaks to the disparity of the housing crash, experts said. While Phoenix is up 30 percent since the trough and New York is up 3 percent, prices in that Sunbelt city plunged 56 percent in the crash, while those in the local market fell 27 percent, said Craig Lazzara, an analyst at S&P Dow Jones Indices, which publishes the index.

“New York had relatively low decline in the deflation of the bubble,” Lazzara said, “and so it had less to bounce back from.”

Lazzara said the shedding of Wall Street jobs was also a factor. “New York, to a large degree, is influenced by the financial industry, and we all know that that industry is contracting,” he said. “When one of the major industries affecting the area is downsizing or is shrinking more than it’s rising, that inevitably is going to affect the demand for real estate.”

Other factors that create a drag on area prices are a backlog of foreclosures due to the state’s relatively slow legal process, and the fact that the housing market in suburban areas like Long Island is underperforming compared to urban areas, said Jonathan Miller, president and chief executive of Miller Samuel.

Other parts of the country also didn’t have to deal with last fall’s superstorm, said Kevin Leatherman, president of the Multiple Listing Service of Long Island. “Hurricane Sandy also skews the numbers,” Leatherman said, “because you have houses that are physically distressed.”


Case-Shiller February Preview: Losses Continue

The S&P/Case-Shiller Housing Index is expected to show further price erosion throughout the country when figures are released Wednesday, according to analysts and housing experts.

Analysts polled by Reuters expect prices to drop year-over-year by 5.5 percent in 20 major U.S. cities in data through December 2011. Month-over-month, the 20-city index is expected to fall 0.6 percent.

The 5.5 percent annual drop would be sharper than the 3.7 percent decline recorded in November data, while the month-over-month fall would be smaller than November’s 1.3 percent decline.

Despite recent gains in home sales and employment, the Index has demonstrated a continued slide in the nation’s home prices since a temporary Federal First-Time Homebuyer Credit expired in 2010, which boosted interest for prospective buyers.

But the losses have been uneven, with prominent cities likeNew York, San Francisco and Washington, D.C., demonstrating relatively strong local markets. This trend is expected to continue, said Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel Inc.

“I think we’re going to see tremendous regional and locational disparity” in December data, he said. “The majority of them are showing continued weakness.”

Washington, D.C., and Detroit were the only cities to post annual price increases in the last month, demonstrating the importance of an improved job market. The Washington area has been sheltered by job cuts around the country because of the strong federal government employment base, along with related industries such as government contractors. Detroit has also recovered from a housing bottom as local automakers have seen sales rebound.

Atlanta, which has suffered from a mass of foreclosures, was down 11.8 percent from the prior year in November and hit a new pricing low during the month. Las Vegas, Seattle and Tampa, Fla., also had new pricing lows in November.

Case-Shiller’s data isn’t the most reliable indicator of the current housing market. It measures home sales through closings in property records, the most reliable indicator of sales. But closings are typically delayed by one or two months after the contract is signed, so next week’s data will draw mostly from sales during last fall, which is considered weaker than the current economy.

The real estate firm Zillow, which forecasts a smaller year-over-year drop of 4 percent in December, expects home sales to continue to rise this year, even if overall prices do not.

“While home values are expected to fall further in 2012 with a definitive bottom probably a year away, home sales are expected to pick up pace in 2012 stabilizing home prices across the nation,” said Stan Humphries, Zillow’s chief economist, in a statement.


Case-Shiller: National and Local Home Prices Rise Slightly


How credible is Case-Shiller to NYC?


How credible is Case-Shiller?


[Looks Fishy] Case-Shiller 20-City Home Price Index Is Spoiling

December 4, 2009 | 12:47 am | |


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My often quoted colleague and friend Dan Alpert at Westwood Capital had a great take on the recently released Case Shiller Index that he shared with me.

Dan looked at the number of cities within the 20-city index in 2009 that had month over month positive or negative changes in price.

The lines form, well, a large fish. A lot has been made of the index “going positive” as a sign housing has bottomed. By June, nearly all cities in the index were showing positive price trends. Since then there has been a growing trend of more cities going negative.

Besides the chart showing a large bird-like beak next month, the fish is starting to spoil. As Dan summarizes:

Res ipsa loquitor


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