Home price data may be overstated
I've been talking about how to measure the current decreases in home prices and how difficult it is to analyze. The most popular measure of affordability, median prices, can vary widely from one year to the next and doesn't necessarily reflect the true pricing picture simply because the changing mix of homes being sold. When many more inexpensive homes are sold, the median price (the middle price of all homes sold) has to be lower. As to the popular Case-Shiller Index, it only includes the top 20 US markets and is heavily weighted toward many of the markets which experienced rapidly rising prices and are seeing an inevitable decline from the large run up.
So I was glad to see an article on by Chris Pummer at MarketWatch that confirmed my suspicions that home price declines may be overstated by skewed data.
"Top officials with the National Association of Realtors and Standard & Poor's, which issues the S&P/Case-Shiller Home Price Index, agreed this week their monthly reports are giving imprecise readings of price changes at all levels -- national, state and regional -- due to rare market conditions that are skewing survey results." Read more.
I am not saying that all the troubles in the Charleston real estate market are over and good times are here once again. Simply, that it may not be as bad as the media has made it out to be. Until inventory begins to decline and demand picks up substantially, there will be downward pressure on prices. That is simple supply and demand. So it's important to watch the trends in inventory and unit sales available here every month.