All real estate trends are local, and what’s happening on a national average is of little consequence when trying to sell your $200,000 home in Phoenix or your $2,000,000 condo in New York City.
While interesting to look at, HomeValueForecast.com views the major indices as imperfect when used for comparison. Specific limitations include:
- The Case-Shiller indices tend to overstate the price trends in both directions for the typical non-distressed homeowner, and may understate the decline for the distressed homeowner
- The FHFA indices miss the upper end of the market
- The NAR indices are very much influenced by a mix of size and quality that is not constant over time
Housing prices within ZIP codes don’t move in perfect correlation with the metro market; neither do housing prices in different neighborhoods within a single ZIP code necessarily move in lockstep. Local Realtors know this and divide MLS markets into neighborhoods that are subsets of ZIP codes or crossover ZIP codes.
As we drill down to more localized markets at the neighborhood level and individual home level we start to see reality for homeowners. If your market is still dominated by distressed sales you are negatively affected, but for many homeowners prices have started to move up. In fact, at the ZIP code level, about a quarter of all home price indices are positive since mid-2006. Maybe the glass is a quarter full for them, but you would never know that relying on national, state or even CBSA level price indices.
Today, with the benefits of technology and better geographic based analysis we can drill down to the homeowner’s micro market and need not rely on aggregation.