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Case-Shiller Redo Shows Less Severe U.S. Home-Price Slump

SEP 3, 2014 2:33pm ET
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The collapse in U.S. home prices that stoked the worst recession since the Great Depression wasn't quite as severe as initially estimated, according to data from S&P/Case-Shiller.

Property values nationally fell 26 percent from the February 2007 peak to the December 2011 trough, not 34 percent as previously reported, revised data showed last week. The index will now be issued monthly rather than quarterly.

The change is the result of CoreLogic Inc. (CLGX)'s $6 million purchase of the S&P/Case-Shiller index from technology company Fiserv Inc. in March 2013. Case-Shiller has spent more than a year retrofitting its model with CoreLogic's bigger, higher-quality data set, leading to a change in how the index looks.

Don't read too much into that, said Case-Shiller principal economist David Stiff. The index only looks different because it's been rebuilt with new, higher-quality data, he said.

"The data change made it looked like the philosophy had changed but it hadn't," Stiff said. "The only takeaway is the two indexes are different. I don't think you can say anything more than that."

In a crowded field of home-price data, Case-Shiller grabs the spotlight. Created in the early 1990s by Wellesley College Professor Emeritus Karl Case and Nobel Prize winner Robert Shiller, it's known for its gauge of home values in 20 cities, which tracked the housing collapse in grim monthly installments.

Methodology Change

For housing nerds, buying Case-Shiller and fiddling with its methodology would be like buying Coca-Cola and changing the secret recipe.

The recipe hasn't changed, Stiff said. The index has always measured repeat, arm's-length transactions. Transfers of ownership such as bank repossessions are thrown out and the value of those foreclosed properties are captured later, when they're sold. That ensures that sales of distressed properties aren't counted twice, he said.

CoreLogic's data allowed Case-Shiller to weed out more bank repossessions, Stiff said.

"It's the old Coke, the formula hasn't changed," Stiff said. "It's made with cane sugar instead of high-fructose corn syrup."

Nationally, home values have climbed 19.4 percent since touching bottom almost three years ago, the new data show. They're now 11.6 percent off the prior peak, compared with a previously estimated shortfall of 18.6 percent through the first quarter.

"They can say don't read too much into it, but it is a different picture," said Bank of America economist Michelle Meyer. "We don't have as big of a hole to climb out of and the gains we've seen so far are that much more impressive."

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