“True knowledge exists in knowing that you know nothing” – Socrates
During the year, in various blog posts and newsletters, we reference the Case Shiller index. For those who are unfamiliar, this report focuses on the “big picture” changes in home prices across the country and provides insight into what is happening in the economy in general. Developed in the 1980s by three economists: Allan Weiss, Karl Case and Robert Shiller, the index, is actually a composite of several:
- The 10-city composite index, which covers Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, DC.
- The 20-city composite index, which includes all of the above cities plus Atlanta, Char-lotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland (Oregon), Seattle and Tampa.
- Individual indexes for 20 Metropolitan Statistical Areas.
- U.S. National Home Price Index provides national trends covering nine U.S. Census areas.
Case-Shiller Indices are reported each month (with the exception of the National Home Price Index, which is quarterly). Each index measures changes in the prices of single-family homes and compares the sales price of the same property over time.
The adjacent graph is the most recent published and provides a good overview of what has been happening with home prices nationally since 1988. As illustrated, prices improved for the third consecutive month in all in cities.
Additionally, As of July 2012, average home prices across the United States are back to their summer 2003 levels for the 20-City Composite and to autumn 2003 levels for the 10-City Composite.
Measured from their June/July 2006 peaks, the decline for both Composites is approximately 30% through July 2012. For both Composites, their July 2012 levels are approximately 7.5% above their recent early 2012 lows.
What does it mean locally?
Most analysts focus on two things when reviewing the latest Case Shiller numbers – how the current month’s results compare with last month (a month-over-month comparison and how the current numbers compare to the same month last year (a year-over-year comparison).
The only problem is that the Index is not truly “national”. Only nine states (plus Washington DC) are fully-represented in the index, and 13 states (including Maine) do not factor in at all. These trends are interesting, but how do they relate to our local housing market?
Through September of this year the median home price is $150,000 compared to $145,000 through the same period in 2011. In Cumberland County these same numbers are $225,000 versus $226,000 representing a small decrease of less than 1%.
Looking more closely at pricing history in Cumberland County, the median price in 2000 was $140,000 and increased each year until 2007 when it reached its highest level of the decade at $252,000. Beginning late 2007 prices begin to drop steadily, eventually reaching their lowest point of $219,000 in 2009.
In 2012 median single family home prices have jumped up and down each month. There have only been three consecutive months of improving prices. The month of September ($233,500) was the highest median price in the last 12. Although this is encouraging, we are a long way from a sustained pricing recovery – especially with the continued high level of inventory available.
This report only addresses prices. On a very positive note unit sales across the state are up 14.2% this year. Unit sales in Cumberland County are up 16.3%. Each month on our website we update sales in selected cities and towns. To view this information follow link on the left side navigation to Local Portland Area Communities
If you are interested in a more comprehensive review of the market in your neighborhood or community, just let us know – we can prepare just about any conceivable report.
Moving to Maine?
About the Author: Michael
