AgentMarkets & Economy

Home-price indices: Which is most accurate?

Lack of cohesion makes gauging values difficult

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Experts dispute the validity of home-price indices commonly used in the residential housing industry and often quoted in bold headlines in the press. Recently, a headline in the San Francisco Chronicle reported a "Big drop in October home prices." This eye-catching lead was based on data from the Standard and Poor's/Case-Shiller 10-City Composite Index that declined 19.1 percent in October 2008 from a year ago. The S&P 20-city index dropped 18 percent. The San Francisco metropolitan region index plunged a whopping 31 percent. The Case-Shiller index does not include all homes sold during a time period. It tracks repeat sales. So, only homes that sold two or more times are included. This may or may not be a representative sample of changes in home prices. Another drawback of this, and other home-price indices, is that they are usually based on too broad an area. For example, the S&P/Case-Shiller San Francisco metropolitan region includes San Francisco, Marin...