A report recently filed by John Burns Real Estate Consulting states home prices have been rising since January by 1.1 percent, or a 4.5 percent annual rate. This information was discovered when JBREC conducted its own analysis in 97 markets and found appreciation in 90 of those markets in the January to March period and 93 markets in the last month. In contrast, a report from Standard & Poor’s Case-Shiller Index states that home prices were on the decline from December to January. The periods on which each index focuses is different, but when information such as that released by Standard & Poor’s is released at a lag this gives consumers and industry professionals a false sense of the market.
Indices such as the Case-Shiller Index, NAR Median Home Price, and FHFA Price Index have a lag of at least 3 months and as much as 6 months, which means that homebuyers and professionals in the industry are getting inaccurate data about the current state of the market, which can be very detrimental to consumer confidence. If one is using “doom and gloom” data to make his or her decision to buy a home, the housing market recovery, which the Burns Home Value Index is showing to already be occurring, may be limited.
So why is there a lag in information provided by Standard & Poor’s Case Shiller Index and not in the Burns Home Value Index? Each index uses separate information; the Burns Home Value Index is calculated on prices that are set at the time purchase contracts are negotiated and signed. Other indices, like the Case-Shiller Index, use when the purchase transaction closes, which is typically two months after the purchase contracts are negotiated with an additional one to two months needed for the closing price data to be compiled.
The important thing to take out of this study is that housing prices are indeed on the rise and have been for several months, which means consumers can be confident in buying an Encinitas home from an Encinitas Realtor. Keep your eyes on the Burns Home Value Index to get real time information on the state of the market.