It is all over the news that the Standard & Poor’s/Case-Shiller 20-Metro area price index, a monthly home-price index that looks at price changes in 20 U.S. metro areas, dropped 18 percent in October 2008 as compared to the same month last year. Should we panic? Do 20 Metro areas studied by Case/Shiller effect your home in Athens GA, or your market if outside of Athens, assuming you are not in one of the 20 Metro areas? I contend that no, it doesn’t. OFHEO, or the Office of Federal Housing Enterprise Oversight, has published information about the differences in their methods of indexing their House Price Index from the Case-Shiller® Home Price Index. Here are some of the points:
Case-Shiller only uses purchase prices, while the All-Transaction OFHEO HPI also uses refinance appraisals.
Case-Shiller mortgage data comes from county records, while OFHEO uses conforming mortgage data from Fannie Mae and Freddie Mac.
Case-Shiller is value-weighted, giving more weight to higher priced homes, while OFHEO equally weights all prices.
Case-Shiller has no data from 13 states, while OFHEO covers all states; important when some areas are growing rapidly.
At times, one of these indexes can show a trend of increasing prices, while the other can show the opposite. So these differences should be carefully considered when you’re deciding on information on which to make investment decisions.
This Link is a FAQ Page discussing OFHEO, Case-Shiller, and HPI or the home price index as used by the OFHEO. For a Technical Description of how OFHEO determines their HPI index please Click Here.
While the Case-Shiller index with its’ 18% drop was all over the news in recent days, the OFHEO has quietly reported over the same time frame a loss of “only” 7.5% over the past year with a “seasonally adjusted basis” of only a 1.1% loss. Quite a difference from Case-Shiller’s results!
As I always say, Real Estate is Local. If we believe this one premise, then let’s look at what OFHEO says about Athens Ga. According to OFHEO’s own HPI, or House Pricing Index, it shows that since the 2nd Quarter of 1986 when they started tracking our “Classic City,” the only times that for a rolling four quarter period the Athens HPI has been down were 4th Quarter of 1990 in which it lost .92% and 3rd Quarter 2008 in which it was down .9%. Every other quarter, including recent quarterly reports the index has been up. That means locally our market has been remarkably stable over the years. This includes 1987, the recession of 1989-1990. It includes the economic slowdown right after the Internet Bubble of 2000 and September 2001 when the world stood still for a period of time. In comparison, since the 2nd Quarter of 1986, both Atlanta and Savannah Georgia had six (6) separate quarters in which for a rolling twelve months their HPI was negative with Columbus and Gainesville Georgia losing value five (5) different times each!
The Athens-Clarke County HPI can be found by clicking the Link. By understanding your market, you can buffer the storm of a nationalized view of real estate and the housing market. If you are in a position to sell, you need these buffers to keep you from possibly making a mistake that might cost you money at the negotiating table.
If you are looking to buy in our wonderful market please be my guest to Search the Athens MLS, and if you have a need for a Buyer Consultation, I would be more than happy to assist you and your family!
