Dueling Economists: Home Prices Up or Down?

Dennis Norman

Naturally, no sooner than I finish writing my post this morning about the Case-Shiller report on home prices in which I actually got to report somewhat “positive” news, my bubble is burst. RadarLogic, another company that has their own home price index that I like, came out with a report saying the Case-Shiller report was too optimistic and that their (RadaLogic) home price index was a better reflection of home values.

The RadarLogic report, which tracks home prices in 25 metro areas throughout the U.S., shows that home prices in June were down 0.2 percent from June 2009. As an explanation for why the RadarLogic report shows a modest decrease in home prices versus the Case-Shiller report which showed a 3.6 increase in home prices for the same period, RadarLogic points out that “the S&P/Case-Shiller indices are calculated using data from transactions that occur over a three-month period. As a result, the indices smooth over recent price movements and can take a number of months to reflect price fluctuations.”

Clearly, Dr. Shiller put it best this morning with his comment about the housing market saying it is “an exceptionally uncertain time.”

For some time now I have expressed concern about the housing inventory including the huge number of homes that will hit the market as a result of foreclosure in the coming months, as well as the short-lived effect of the housing tax credit. The RadarLogic report expresses these same concerns and goes on to reiterate their statement from spring of 2009 thatthe only effective stimulus of new housing demand will prove to be a precipitous decline in home prices.” They go on to say their “current analysis shows early signs that such a dynamic is approaching.”

So, whether you believe Case-Shiller or RadarLogic has a better handle on home values, neither appear to be very optimistic about the short-term future of home prices.

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