Home Prices and Forecasts

By Norm Miller, PhD. and Mike Sklarz, PhD, Date: Sept 4, 2009 This fall we can expect an increase in the flow of foreclosures.  Federal and California moratoriums and the hopes of loan modification have delayed the housing markets move towards normality.  So how will this onslaught affect the housing price statistics and in turn the way media will play it? Some educated consumers know that the REALTOR median house price figures are affected by the mix of homes and thus will move dramatically up or down when higher priced home enter or leave the market.  In the short run median prices at the metropolitan level do little to inform homeowners how much their homes may have changed in value over time.  Then we have more mysterious indexes produced by famous economists like Robert Shiller and Karl Case or government agencies like OFHEO, now FHFA.  Can we rely on them for an indication of what the typical home is worth?  Normally they are better than REALTOR median figures for judging price trends, but in recent years with all the distressed sales they too have deviated from reality.  More explanation on the various indicators biases of home price trend indicators are provided in the references below.  Here the focus is the bias created by distressed home prices which vary from market to market, but which are quite extreme in the current market.

Read More