According to the Case-Shiller Home Price Index data released today, Detroit-area home prices decreased by -4.62% from March 2009 to March 2010.
According to the Michigan Association of Realtors, we have the following March-March increases in average home prices for the Detroit metro areas included in the Case-Shiller Detroit metro area (and year-to-date January-March data in parentheses, since the Case-Shiller index uses a 3-month moving average):
Detroit: +43.99% (+29.33%)
Lapeer: +17.38% (+6.29%)
Livingston: +7.87% (-2.28%)
Macomb: + 11.89% (+7.08%)
Oakland: + 21.51% (+23.14)
Entire State of Michigan: +9.86% (+10.76%)
Here’s a description of the Case-Shiller methodology, which says that:
“The S&P/Case-Shiller Home Price Indices are designed to be a reliable and consistent benchmark of housing prices in the United States. Their purpose is to measure the average change in home prices in a particular geographic market. The monthly S&P/Case-Shiller Home Price Indices use the “repeat sales method” of index calculation – an approach that is widely recognized as the premier methodology for indexing housing prices – which uses data on properties that have sold at least twice, in order to capture the true appreciated value of each specific sales unit.
To calculate the indices, data are collected on transactions of all residential properties during the months in question. The main variable used for index calculation is the price change between two arms-length sales of the same single-family home.”
In other words, it looks like the Case-Shiller index controls for quality of housing, and compare the same exact house sold in two different months. While that might be theoretically the premier methodology, it should also be recognized that there could be significant departures between prices from the Case-Shiller indices and average price data from housing sales. For example, all indications from the Michigan Association of Realtors are that home prices have increased in the Detroit area from a year ago, by double-digits in most cases for March, and for Detroit and Oakland year-to-date. That’s quite a different picture than -4.62% decrease according to the Case-Shiller for March.