The S&P | Case-Shiller Home Price Indices (CSI) is one of the most widely cited housing reports in the United States, and arguably the most respected by both economists and residential real estate experts. Started by Robert Shiller of Yale University and Karl Case of Wellesley College, the index uses a three month moving average of home sales in twenty U.S. metropolitan regions, it operates on a sixty day delay, and it only tracks sales of properties that have sold twice (in an effort to best gauge price changes by measuring appreciation or depreciation at the same property), and it is not seasonally adjusted.
On February 23, 2011, the NY Times wrote an article analyzing the latest data from the index. On the same day, Crain’s published an article stating that New York-area housing prices hit 7-year low. The day before, the NY Post noted that home prices tumble to new lows. The following day, the Wall Street Journal covered the index’s release and noted that Home prices slide despite recovery. So what does all of this mean for Manhattan real estate?
This article is not an evaluation of the methods or an analysis of the data used by the CSI. We do not question that it is one of the best reports available for the national market. This is also not an admonition of the above New York based news publications that published the data. They all have a national readership and are not writing just for New Yorkers. What I would like to do is shed some light on the report in an effort to assist New York real estate sellers and buyers in understanding what the report does and does not say about our market.
Here is what you need to understand:
- The CSI excludes the sale of both condos and co-ops in its analysis. Condos and co-ops constitute approximately 98% of the sales of Manhattan residential real estate, 46% of Brooklyn sales, 42% of sales in the Bronx, and 40% of sales in Queens.
- The CSI excludes new construction sales (as they only count properties that have sold twice), though according to StreetEasy there are 445 new construction projects in Manhattan right now.
- The CSI includes many locations in the New York metropolitan area that might surprise Manhattanites. For example:
- Fairfield and New Haven, Connecticut
- Bergen Essex, Hudson, Hunterdon, Ocean, Passaic, Morris, Monmouth, Middlesex, Somerset, Sussex, Union, and Warren, New Jersey
- Dutchess, Nassau, Orange, Putnam, Richmond, Rockland, Suffolk, and Westchester, New York
- Pike, Pennsylvania
Jonathan Miller, president and CEO of appraisal firm Miller Samuel stated last year that,
“Case-Shiller is an index of single-family homes, and it’s terrific for measuring housing markets that are heavily concentrated with single-family homes,” but how relevant is that to analyzing the state of the Manhattan market? Noah Rosenblatt, founder of data analytics and consulting firm Urban Digs, told the Real Deal that “It takes into account counties in New Jersey and Pennsylvania . . . If you’re following Manhattan real estate, you can’t compare places like that to Manhattan.”
What concerns us at Village Confidential is that most Manhattan buyers and sellers do not care to analyze the data set relied upon by national housing indices. They open up their paper (or more likely click on their favorites link) and they read articles from the NY Times, the Journal, the Post, and Crain’s, and many of them will extrapolate from the commentary and the data that “so goes the CSI, so goes Manhattan real estate.”
So the question is, to what extent will national headlines (sometimes in local newspapers) affect buyer and seller sentiment in Manhattan? What say you?