Home values were reported unchanged in November 2010, on average, according to the Federal Home Finance Agency’s Home Price Index.
We say “on average” because the government’s Home Price Index is a data composite for the country. The index doesn’t measure citywide changes in places like Madeira , nor does it get granular down to the neighborhood level to measure places like Mt Lookout.
Instead, the Home Price Index groups state data in 9 regions with each regions having as few as 4 states in it, and as many as 8.
Not surprisingly, each of the regions posted different price change figures for the period of October-to-November 2010.
A sampling includes:
- Values in the Pacific region rose +1.2%
- Values in the New England region rose +0.3%
- Values in the Mountain region fell -1.9%
The complete regional list is available at the FHFA website.
That said, none of these numbers are particularly helpful to today’s home buyers and sellers and that’s because everyday people don’t buy and sell homes on the Regional Level. We do it locally and the government’s Home Price Index can’t capture data at that level.
It’s a similar reason to why the Case-Shiller Index is irrelevant to buyers and sellers.
November’s Case-Shiller Index showed home values down 1 percent in November, but that conclusion is a composite of just 20 cities nationwide — and they’re not even the 20 largest cities. Philadelphia, Houston and San Jose are conspicuously absent from the Case-Shiller list.
So why are reports like the Home Price and the Case-Shiller Index even published at all? Because, as national indicators, they help governments make policy, businesses make decisions, and banks make guidelines. Entities like that are national and require data that describe the economy as a whole. Home buyers and sellers, by contrast, need it locally.
Since peaking in April 2007, the Home Price Index is off 14.9 percent.
Consistent with the most recent Case-Shiller Index, the government’s Home Price Index said home prices rose between July and August.
The Federal Home Finance Agency’s data showed values up 0.4 percent nationwide, on average. Region-by-region, however, the results were scattered. Coastal states tended to perform poorly. Plains states tended to perform well.
A brief look at the regional disparity:
- West South Central : +1.5%
- East North Central : +1.2%
- Pacific : -0.2%
- South Atlantic : -0.2%
Breakdowns like this are important because they highlight the fundamental problem with national real estate data and that’s that home buyers in Madeira don’t buy real estate in a national market, or even a regional one.
Buyers buy local.
When we look at national figures like the Home Price Index, it’s important to remember that real estate is a collection of tiny markets which, when lumped together, form small markets which, in turn, lump together into larger markets and so forth.
To illustrate this point, a deeper look at August’s Home Price Index data shows that, within the aforementioned Pacific Region, in which home values fell 0.2%, the state of California posted a 2.9% increase. You can be sure that within the state of California, there are cities that performed better than the 2.9 percent, and within those cities, there are neighborhoods that did the same.
Real estate is most definitely local.
That said, we can’t discount the national report entirely. Broader housing statistics like the Home Price Index reflect on the economy and are often used to help shape policy in the nation’s capital. When you need to know what’s happening in your hometown, though, your best source of data is a knowledgeable real estate professional.
According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide. This, after a half-percent monthly increase in prices in May, on average.
Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.
In contrast to “national markets”, the real estate markets in which you and I live are decidedly local. It’s a major difference and the distinction renders the Home Price Index somewhat less important.
After all, the HPI doesn’t account for housing activity in individual neighborhoods like Mt Lookout , nor does it track value across cities like Cincinnati. Instead, it summarizes data in giant chunks of geography.
A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average. The others varied by as much 1.3 percent.
As a sample:
- Mountain Region : + 1.7 percent
- New England : + 0.2 percent
- South Atlantic : +1.0 percent
And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.
Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood. That type of granularity can’t be tracked in a report like the Home Price Index.
The best place to get that data is from a local real estate agent that knows the market well.