By Peter Ricci
The Case-Shiller Home Price Index, which we wrote about earlier today, is undoubtedly the most influential monitor for the nation’s home prices in the current market.
But such enthusiasm, as Inman News has demonstrated in the past, is not shared by all Realtors and other real estate professionals, and to confront what it sees as inaccuracies in the greater world of home price indexes, the National Association of Realtors (NAR) has just announced that it is working on its own national home price index.
A Home Price Index Of, By, and For Realtors?
Inspired in part by an index the Florida Association of Realtors (FAR) will launch in September, NAR’s index operates under a “same-sale” philosophy that flies in the face of most home price indexes, which instead focus on median price. Some key points NAR makes:
- A same-sale index tracks the sale prices of the same house over a period of time, so the price changes in a given area are more accurately reflected in the index.
- Median home price indexes, by contrast , can be riddled with errors; month to month, there could be more home sales in lower price brackets or more in the higher brackets, and the median price can swing up and down based on that.
- Another area home price indexes must account for are “data anomalies,” such as a renovation; for instance, if a home sells for $200,000 one year, and then, after an extensive renovation, it sells for $400,000, an index should account for that.
Home-Price Challenges Ahead
There are still other challenges to NAR and FAR’s home price index efforts. For instance, FAR is using public data from the Florida Department of Revenue that dates back to 1995, but they only just got the data from 2011 – a delay that can make accurate readings a challenge.
To compensate, John Tuccillo, FAR’s chief economist, said the association will compare MLS data to its Department of Revenue database, using, of all things, tax identification numbers – who’d a thunk that home price indexes were so hard to create!? We’ll definitely cover FAR’s index when it comes out next month, and will eagerly await NAR’s; though, as the association admits, “the task is quite a bit bigger and it’s only just beginning.”