Detailed Definition
The Case-Shiller/S&P Home Price Index is an influential measure of U.S. residential real estate prices, tracking changes in the value of single-family homes. Developed by Karl Case and Robert Shiller, the index uses a repeat-sales methodology, focusing on homes that have sold multiple times to ensure an accurate measure of price trends, free from biases associated with occasional unique characteristics of homes. The data gathered from local deed records and transactions help reflect real estate price movements within 20 major metropolitan areas.
Examples
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Los Angeles Metropolitan Area: If home prices in the Los Angeles area appreciate by 10% over a year according to the Case-Shiller Index, it suggests robust growth in demand for housing in this locality.
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National Home Price Index: If the National Case-Shiller Index shows a decline, it may indicate a cooling of the U.S. housing market, influenced by factors like increasing mortgage rates or economic recession.
Frequently Asked Questions
What does the Case-Shiller/S&P Home Price Index indicate?
The Index indicates trends and changes in home prices in selected metropolitan areas, providing insights into the housing market’s health and investment opportunities.
How often is the Index updated?
The Case-Shiller Index is updated monthly, with each release providing data for the preceding two months.
Are all types of residential properties included?
The Index specifically tracks single-family detached homes and does not include condominiums, multi-family properties, or new constructions.
How is the Case-Shiller Index calculated?
The Index is calculated using the “repeat-sales” method, which tracks the sale prices of the same homes over time to measure price trends accurately.
What metropolitan areas are covered?
The Index covers 20 metropolitan areas, including New York, Los Angeles, Chicago, and Dallas.
Related Terms with Definitions
Repeat-Sales Methodology
A statistical method used to measure price changes of the same property over time, minimizing distortions caused by property-specific characteristics.
Home Price Appreciation
The increase in the value of a home over time, often measured and reported by indices such as the Case-Shiller Index.
Metropolitan Statistical Area (MSA)
A region that comprises a core city and its surrounding suburbs, characterized by high population density and economic ties.
Housing Bubble
A market condition where an overheated housing market sees rapidly increasing home prices, often followed by a sharp decline.
Real Estate Market Trends
Patterns or tendencies in the real estate market, often identified by indices and studies, indicating the direction of market movements.
Online Resources
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S&P Dow Jones Indices Official Site: Comprehensive information on the methodology and data updates for the Case-Shiller Index.
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U.S. Housing and Urban Development (HUD): Additional resources and housing market data.
References
- Case, K.E., & Shiller, R.J. (1989). The Efficiency of the Market for Single-Family Homes. The American Economic Review, 79, 125-137.
- Shiller, R.J. (2008). The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It. Princeton University Press.
Suggested Books for Further Studies
- Shiller, R.J. (2015). Irrational Exuberance. Princeton University Press.
- Case, K.E., & Fair, R.C. (2007). Principles of Economics. Prentice Hall.
Real Estate Basics: Case-Shiller/S&P Home Price Index Fundamentals Quiz
