Posted by: realestatewebtrainer | March 30, 2011

The Case-Shiller Real Estate Index Illuminated

The blog today is about understanding the Statistics of Real Estate, especially how the bubble formed and the process it is going through as it unwinds. These types of Statistics can be a useful tool for agents who confront stubborn Real Estate Sellers or unrealistic Buyers to create a framework for thoughtful transactions. These Statistics and charts on their own are not very useful since Real Estate is very localized – Real Estate Agents must also offer MLS Data that helps Sellers make better informed decisions on the Sale of their Property.

The Case-Shiller Real Estate Index can be quite illuminating if you break it down in time; Here is a link to the latest one:

What are The S&P/Case-Shiller Home Price Indices? They are the leading measures for the US residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions. The indices are calculated monthly and published with a two month lag.

Let us study a chart that truly reveals the extend of the Real Estate Bubble and how it is unwinding.

This is the Chart of the Index in the Nineties:

Case Shiller Home Index in the 1990s

As you can see, during the Nineties, the growth in Home Value was measured with very little spikes and hardly any speculation; yet toward the end of the Nineties, right after 1997 you start seeing the beginning of prices increasing with some momentum.


This is the Chart of the Index from 2000 to 2006:

Case Shiller Index 2000 to 2006

The jump of Home values is now a huge spike – prices nearly tripled on average, most market doubled in value in about 6 years; other areas in Florida, Nevada, California, and Arizona increased by a factor of 5 – pure speculation. Many who were looking at these charts in 2004 and 2005 could not make sense of the numbers yet could not call it a bubble; the new normal became that price appreciations in the US would be 25% annually and no one was going to complain about that.


This is the Chart of the Index currently – as of January 2011:

Case Shiller Index as of Jan 2011


In this chart you can truly see the correction – in essence we are paying for the unfettered gains of the early Nineties. The challenge with Market Corrections is that they are not steady – just like we did not know when the top was going to occur, we are still trying to find when the bottom is going to take hold. Bottoms in any Market are very noisy, some months are up others are down and everyone scratches their head of what it all means.

Prices currently are back to their 2003 level; some call that “The Median of Insanity” – basically a level at which speculative prices have been removed and some appreciation gained from the Nineties. We may continue to experience this type of bouncing up and down in 2011 as the inventory of Distressed Properties continues to wane.

Happy Blogging 🙂 – Key Yessaad, Real Estate Trainer


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