What Is the S&P CoreLogic Case-Shiller National Home Price Index?
The S&P CoreLogic Case-Shiller National Home Price Index measures the change in the value of the U.S. residential housing market by tracking the purchase price and resale value of single-family homes that have undergone a minimum of two arm's-length transactions. The index, widely viewed as a barometer of the U.S. housing market and broader economy, is named after two of its creators: Karl Case and Robert Shiller.
- The S&P CoreLogic Case-Shiller National Home Price Index measures the change in the value of the U.S. residential housing market.
- It does this by tracking the purchase price and resale value of single-family homes that have undergone a minimum of two arm's-length transactions.
- The index was developed in the 1980s and has gone on to become a widely used and respected barometer of the U.S. housing market and broader economy.
Understanding the S&P CoreLogic Case-Shiller National Home Price Index
The Case-Shiller Index was developed in the 1980s by three economists: Allan Weiss, Karl Case, and Robert Shiller. Since then, it has gone on to become a widely used and respected barometer of the U.S. housing market and also the broader economy.
The condition of the housing market and overall economy are interlocked in many ways. When real estate prices go up, homeowners often loosen their purse strings. Developers also grow in confidence, boosting gross domestic product (GDP) by investing more in new land, materials, and jobs to build new houses.
Investors can take advantage of changes in home prices indirectly by investing in S&P Case-Shiller Home Price Index futures and options.
The majority of American houses are owner-occupied, so looking at housing price indexes can provide a good idea of how much money is circulating in the economy. This means that the S&P CoreLogic Case-Shiller National Home Price Index, one of the most well-renowned measures of house valuations in the U.S., is very closely monitored by economists and investors.
The Case Shiller Home Price Index averaged 164.27 from 2000 until 2019, according to Trading Economics, hitting an all-time high of 217.65 in June 2019 and a record low of 100 in Jan. 2000.
Types of S&P CoreLogic Case-Shiller National Home Price Index
The S&P CoreLogic Case-Shiller National Home Price Index is broken down into several different indexes, making it possible to compare national averages to individual metropolitan areas. The indexes are as follows:
- The national home price index, covering nine major census divisions. This particular index is calculated quarterly and published on the last Tuesday of February, May, August, and November.
- The 10-city composite index, covering Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, DC.
- The 20-city composite index, including all of the above cities plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland (Oregon), Seattle, and Tampa.
- Twenty individual metro area indexes for each of the cities listed above.
All indexes, bar the national index, are published on the last Tuesday of each month at 9 a.m. Eastern Standard Time (EST).
The S&P CoreLogic Case-Shiller National Home Price Index Method
According to S&P, the indexes are put together using the following methodology:
- Repeat Sales Method: Each index measures changes in the prices of single-family, detached residences using the repeat sales pricing technique.
- Index Approach: Indexes are based on observed changes in home prices and are designed to measure increases or decreases in the market value of residential real estate in 20 defined metropolitan statistical areas (MSAs) and three price tiers—low, middle, and high.
- Creation of Sales Pairs: The movement in the price of single-family homes is measured by collecting data on actual sale prices. When a home is resold, the new sale price is matched to its first sale price. These two data points are called a "sale pair" and the difference in the sale pair is measured and recorded. Sales pairs are designed to yield the price change for the same house, while holding the quality and size of each house constant.
- The Weighting of Sales Pairs: The indexes are value-weighted and designed to control for the quality change in the homes being measured. Sales pairs are assigned weights to account for fluctuations in price that can be attributed to factors such as extensive home remodeling, adding a home addition, or extreme neglect. Time intervals between sales are also considered.
- Three-Month Moving Average: Indexes are calculated monthly, using a three-month moving average algorithm. Home sales pairs are accumulated in rolling three-month periods.
Limitations of the S&P CoreLogic Case-Shiller National Home Price Index
The S&P CoreLogic Case-Shiller Indexes do not cover everything. Obvious exceptions include new constructions, condominiums, and co-ops, multi-family dwellings and other properties that cannot be identified as single-family.
It is also worth bearing in mind that there is a two-month time lag in the data that is reported so a report issued in May, for example, would only cover home sales through March.
The Case-Shiller indexes are perhaps the most well-known trackers of residential property prices. However, there are several alternative indices available that investors can also use to track real estate valuation fluctuations.
In the U.S., they include the Federal Housing Finance Agency's (FHFA) Housing Price Index (HPI), First American CoreLogic's LoanPerformance Home Price Index, and the IAS360 House Price Index. Each index differs in terms of the criteria it uses.