Which Housing Story Is More Important?

January 31, 2012

Two versions of the S&P/Case Shiller Composite Housing Index for November were published yesterday.

Story one. The CBS/CNBC version carried the following main points:

1. Headline: "Home prices gain for 10^th month in row"" 
2. Conclusion: "a string of gains point to a housing market that is on the mend" 
3. Reason for conclusion: " the S&P/Case Shiller Composite Index of 20 metropolitan areas gained 0.6% in November on a seasonally adjusted basis, in line with economists' forecasts."

Story two. Article from Market Watch (WSJ) frames the story differently and at takes a closer look:

1. Headline: " November home prices tick down" 
2. Conclusion: Housing is clearly recovering."
3. Reason for conclusion: ..."the S&P/Case-Shiller 20-city composite index posted a non-seasonally adjusted 0.1% decrease in November following a 0.2% decrease in October. (However,) "After seasonal adjustments, the 20-city house-price index rose 0.6% in November ...and prices were 5.5% higher year-over-year."

Note NBC uses seasonally adjusted data only while Market Watch uses both. S&P/Case-Shiller recommends using non-seasonally adjusted data and year-over-year data for the trend.

For the casual reader, this difference may not seen that important. However, for the aggressive reader who is always looking for possible trend changes, this could be important and needs to be watched. For example:

            1. Since prices do not rise forever, maybe after 12 months, this (two month negative) could be the beginning of a correction?  

           

            2. Will prices continue to rise throughout 2013? They will have to if housing is going to contribute to GDP growth the way most economists believe it will. 

Always question data.