Definition
The Case-Shiller/S&P Home Price Index is a highly regarded real estate price index that tracks changes in the value of residential real estate across various regions in the United States. Developed by economists Karl Case and Robert Shiller, the index is produced by Standard & Poor’s. The index applies a constant-quality, repeat-sale methodology that accounts for variations in both the characteristics and location of single-family homes. Data is compiled from local records of home sales, ensuring an accurate and dynamic understanding of residential real estate trends.
Examples
Example 1: Tracking Real Estate Markets
Investors and policymakers use the Case-Shiller Index to monitor the health of the housing market. For example, a consistent rise in the Case-Shiller Index in cities like New York or San Francisco indicates a strong real estate market in those areas.
Example 2: Economic Analysis
Economists use the index to analyze broader economic conditions. For instance, a sudden drop in the Case-Shiller Index might be interpreted as a sign of economic strain that could have implications beyond just the housing market.
Frequently Asked Questions (FAQs)
What is the purpose of the Case-Shiller Index?
The index’s primary purpose is to measure the price changes of residential real estate to give an accurate picture of market trends.
How often is the Case-Shiller Index updated?
The Case-Shiller Index is typically updated monthly, allowing analysts to observe short-term trends and long-term movements in home prices.
Which homes are included in the Case-Shiller Index calculation?
The index includes single-family homes. It uses a repeat-sale methodology, focusing on properties that have been sold multiple times to assess price changes.
Why is the repeat-sale methodology important?
The repeat-sale methodology helps to control for differences in home quality, ensuring that the index reflects real changes in market prices rather than variations due to specific home improvements or deteriorations.
Related Terms
Home Price Index
An index that measures changes in the prices of homes.
Standard & Poor’s (S&P)
A financial services company that provides market intelligence, including indices and ratings.
Economic Indicators
Statistics that provide information about economic performance and conditions.
Online References
- S&P Dow Jones Indices
- Federal Reserve Economic Data (FRED)
- Investopedia: Case-Shiller Home Price Index
Suggested Books for Further Studies
- “Irrational Exuberance” by Robert J. Shiller - A comprehensive look at economic bubbles, including the role of home prices.
- “The New Case for Gold” by James Rickards - Discusses economic indicators and their impact on markets, including real estate.
- “Real Estate Market Valuation and Analysis” by Joshua Kahr and Michael C. Thomsett - Delves into the methodologies used for evaluating real estate markets.
Fundamentals of Case-Shiller/S&P Home Price Index: Real Estate Basics Quiz
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