UPDATE: Reader Tyrone of the excellent "Housing Bubble Hall of Shame" notes that the current issue of Realtor Magazine features another absurd CSI/Shiller hit piece entitled "Getting Case-Shillered" this time by Realty Times editor Blanche Evens.Keep in mind, Shiller's MacroMarket's sold the rights to the CSI to Standard & Poor's last February and even when they derived fees from the futures trades, MacroMarkets had no bias toward either the up or down trade.
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As I have been noting recently, there has been a concerted effort by real estate industry insiders to undermine the credibility of the S&P/Case-Shiller Home Price Indices (CSI) in a sordid and underhanded bid to wrestle back control of the perception of the value of residential real estate in the eyes of the public.
The National Association of Realtors (NAR) provided the opening salvo when in December of 2006 they used a contrived celebration of the year’s most “influential thought leaders” as an opportunity to attempt to malign the reputation of esteemed Yale Professor and co-creator of the Case-Shiller indices, Robert Shiller.
Then, earlier this year, Lawrence Yun, chief Realtor economist, provided an unequivocal “shock and awe” style assault with his shameful and patently ridiculously blathering attack on Robert Shiller and the CSI.
Now, the Realtor minions have picked up the scent and are re-tooling their deceptive tactics to account for a new strategy of home value obfuscation.
Recently, Bernice Ross, CEO of The Real Estate Coach - “The Place to Go to Make Real Estate Dough!”, published a two part series in Inman News dedicated to attacking the credibility of the S&P/Case-Shiller indices as well as Robert Shiller.
First, Ross absurdly paints the CSI as the “gold standard” used by the media to “scare” the public and further claims that media sources cite the CSI results “rather” than numbers produced by the Office of Federal Housing Enterprise Oversight (OFHEO) and NAR.
Anyone who reads this blog regularly will easily see how ridiculous that claim is … we could only wish that someday the media would stop using NAR numbers altogether and only report the “sales only” (data that excludes refinance transactions) data from OFHEO or the even more accurate CSI and Radar Logic data.
Next, Ross claims that the NAR, OFHEO and Realogy numbers all agree and conclude that home prices nationally are down less than 1% and that in many areas, prices are actually on the rise.
Again, Ross could not be more wrong.
Even using the NAR’s own Q1 2008 metro area home price report, it is plainly obvious that in most of the country home prices are seriously deteriorating.
In fact, 147 of the 157 metro regions the NAR tracks showed notable declines from their respective peaks (set between 2006 and 2007) while 99 showed significant annual declines.
Fully 72 metro markets have experienced peak declines greater than 10% while 18 have lost over 21% from their respective peaks set between 2006 – 2007.
Furthermore, as I have detailed in past posts, the “Sales Only” OFHEO data correlates to a high degree with both the S&P/CSI results as well as the Radar Logic results so there is no reason to suspect that the CSI is somehow untrustworthy.
Using her “scientific” method of “corroboration” Ross makes the claim that the most recent monthly OFHEO data for the various Census divisions “corroborates” well with the NAR and Realogy results but not with the latest CSI, concluding that the CSI’s use of properties that required non-GSE loans (Jumbos and other mortgages NOT made possible by Fannie Mae and Freddie Mac) and aspects of the CSI’s methodology itself are responsible citing a paper written by OFHEO economist Andrew Leventis .
What Ross fails to mention, though, is that the point of the Leventis paper was to attempt to demonstrate that the OFHEO data was, in fact, nearly perfectly correlated with the CSI data (use of sales only OFHEO indices with value weighting made the majority of the difference).
Next, Ross claims that the CSI, as she puts it, is “bogus” because it has poor regional coverage and doesn’t include new construction, condo or multifamily properties.
The CSI methodology makes it perfectly clear what areas home sales transactions are used as source data for their calculations and they happen to encompass the majority of the nation’s homes.
The more rural areas that are NOT covered by the CSI may have better price stability and even continued appreciation during the downturn but they also had very weak growth during the boom years and hardly represent the majority of metro markets now suffering widespread losses.
As for exclusion of new construction, condo and multi-family properties, as I have shown in the past, the Radar Logic data covers ALL forms of residential real estate and happens to have a high degree of correlation to the CSI data.
Finally, Ross makes a senseless final attempt to besmirch Shiller himself by suggesting that you shouldn’t trust the CSI or the “academicians and Wall Street with their complex derivatives that gave us the subprime mess” and instead trust the NAR, the federal government and Realogy.
Bernice Ross is nothing new… nor is the long line of real estate profiteers attempting to exploit the nation’s households need for basic shelter in order to make commissions and sell books and services.
The NAR and all other real estate insiders have worked tirelessly to control the perception of residential real estate value during the housing boom, let’s not allow them to distort the truth now that the nation's housing markets have collapsed… haven’t they done enough damage?
