Antiquated Case-Shiller Price Index Vs. Innovative Real-Time Showings Data and Forecasting
Case-Shiller real estate market data reports show apparent weaknesses, where Showing Suite’s reports lead in making accurate market predictions.
Submitted by: RE Technology
SAN DIEGO (May 25, 2012) - Retailers have known for years that a predictable model of retail sales is to examine foot traffic at their retail locations. If retail foot traffic is increasing, then retail sales will follow and vice-versa. Nowhere is this logic also more apparent than in resale home sales. If foot traffic or “Showings” are increasing, then you can rest assure that there will typically be a lag of 30-90 days to the pending home sales following the exact same trend.
New home builders have used these foot traffic numbers for years for their project developments. The new home sales associate counts the traffic everyday that visits the model homes and then reports them to corporate; and other new home sales gather data from companies, then those stats can then be reported on a local, state, region, and nationwide basis.
So why until now, has this never been utilized on a nationwide basis for resale real estate to identify where sales trends are developing, and where the market is turning before pending sales numbers come out? The reason is that resale real estate agents do not report their traffic numbers, and many times they do not know the numbers for each listing either. But, one company has been able to gather this data from their nationwide user base of showings entered. Homefeedback.com launched in 2000, which later became Showing Suite, gathers showing data from virtually every market in North America. That data has proven to predict pending sales increases and decreases.
Showing Suite’s CEO Rick Bengson states, “We have a leading indicator for resale home sales with real-time market data and all other real estate forecast models are lagging indicators or not a good representation of the whole market. If you want to know if sales will be going up or down ahead of time, that is what our data is best utilized for”
The Case-Shiller Home Price Indices, compiled by Standard & Poor's and usually referred to as the S.&P./Case-Shiller index (CSI), tracks the value of residential real estate in 20 metropolitan regions across the United States. The CSI is the most widely-cited real estate index nationwide, but what most people don’t talk about are the critical flaws of the CSI.
The obvious trouble with the CSI is that the reports are published with a two month lag, which means that the CSI doesn’t represent the current state of the housing market. The data is pulled from public sources for closed sales, not current contracts at that time. So the currently reported data represents sales that happened mostly two months before that. Then, that data is aggregated with the data collected in the two previous months, for sales contracts from the 2 months before that, and reported as an average price for the 3 months. The theoretical midpoint of the data reported now is from 3 and a half months ago, representing the average contract price from roughly 5 and a half months ago. At this point, the CSI is already highly outdated and misleading in terms of the current market state. More importantly, based on these reports, there is no way to make any real estate market predictions beforehand, leaving real estate investors and home sellers in the dark about any current or future conditions.
In a recent report, Kevin Caron, strategist for Stifel Nicolaus stated “The data doesn't hit the database until the public filing after closing. But the closing may be months after the agreement between buyer and seller (and the banks that provide financing). Ultimately, the lag can be a long time (maybe six months) between when a price is agreed upon, the mortgage is secured, the closing occurs, and the sale is recorded and available for public use.”
On the other hand, Showing Suite’s Showing Statistics reports collect data directly from tens of thousands of agents, coast to coast, providing real-time showing data that can provide market forecasts as soon as one day after a home showing has occurred. By analyzing the amount of home showings a listing receives, we can accurately measure buyer’s interest or “foot traffic” of a particular home, which almost invariably leads to future sales.
Showings happen before contract and typically 30+ days before a closing. This type of intelligence is a true leading indicator in a world otherwise populated by lagging indicators.
One major flaw with the CSI is that the reports only include real estate market data for single family and detached homes. Sales of multi-family units are completely excluded. In some markets, such as Chicago or New York, sales of these types can represent a large percentage of overall monthly sales.
Showing Statistics reports collect data automatically from any type of property, whether it’s a single family, duplex, condo, co-op or empty lot.
Another problem in our opinion is with the CSI is the limited sample set. The reports only include the top 20 metropolitan areas (Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington). According to Wikipedia, there are more than 3,100 municipalities nationwide, these 20 cities account for less than 1% of all cities nationwide. Then, within those tracked cities, CSI reports an average, lumping disparate neighborhoods and streets into one big number.
Showing Suite’s reports are captured from the exact address of each listing. Data reports can be segmented into states, cities, metro areas, and specific zip codes.
For actionable, real-time real estate market data, look past the Case-Shiller Index. Look into the market data collected by Showing Suite’s reports which provide an accurate picture of up to the minute market conditions.
Please direct press related questions or comments to Rick Bengson at [email protected].
About Showing Suite, Inc.
Showing Suite, Inc. develops and implements market-leading tools that allow real estate professionals to sell homes smarter and faster. Since 2001, the company has brought a suite of web-based software solutions for the real estate sector to market, including its flagship product, HomeFeedback®, as well as Home Followup , Listing Sync, Showing Sync®, ForeclosureFeedback®, and Showing Calendar®. Since inception, Showing Suite™ has helped more than 800,000 real estate professionals in the U.S. and Canada retrieve valuable feedback from potential buyers to increase home sales.