Please ensure Javascript is enabled for purposes of website accessibility

The Story of Case vs. Shiller – When Two Real Estate Experts Don't See Eye to Eye

As a disclaimer, before I start ranting in this post, I must say that I am not a fan of the Case Shiller Index.  It’s not that I disagree with their statistics, or their method of collecting data or whatnot.  In a previous post, I noted that:

 …the thing that makes me think the numbers are somewhat useless [in a market like San Francisco], is that (as pointed out) the index only tracks single-family homes (not condominiums which represent half the transactions in San Francisco), is imperfect in factoring out changes in property values due to improvements versus actual market appreciation, and includes San Francisco, San Mateo, Marin, Contra Costa, and Alameda in the “San Francisco” index… which in my mind is their greatest error.

So when the two economist (that would be Karl Case and Robert Shiller) predicted gloom and doom in every real estate market across the country, including the San Francisco real estate market, I had a tough time swallowing that pill.  And indeed, while that “pill” did ring true for much of the US real estate market, cities like San Francisco, Seattle and New York held strong and weathered the storm, and proved that Case & Shiller’s predicions didn’t ring true across the board.
And every month, when their index is published, I am bombarded with questions from clients and blog readers about my opinion on what’s happening with SF real estate and where it’s headed because the Case Shiller Index shows a drastic decline in San Francisco.  I curse the day that those two guys met each other.  Their index forces me to (calmly) explain (over and over and over) that San Francisco, San Mateo, Marin, Contra Costa, and Alameda are all lumped ino the “San Francisco” data and that they don’t track SF condo sales, which make up half the market here.  (I have thought about creating a recorded message that I can just play that repeats the above facts so that I don’t have to answer questions about the index ever again.)  >:-<
In the previous post that I mentioned, I stated:

To be honest, there are too many indexes, and too many experts to keep up with all of their opinions, which by the way, are typically all contradicting each other… sometimes subtly, and sometimes much less subtly.

And to my great surprise, I found an article in the Boston Herald, where the two experts that actually developed the damn index (if you’re following along, that would be Karl Case and Robert Shiller) can’t even agree on the state of the market!  HA!
The article was titled “Real estate market ready for a rebound” and went on to talk about Karl Case’s opinion that the real estate market has hit bottom and that now is a good time to buy. 
Meanwhile, Karl’s buddy Robert Shiller has predicted that “the decline in home values would exceed that of the Great Depression.” 
Now, I ask you, when two of the country’s most respected “experts” on the state of the real estate market can’t agree on the state of the real estate market, who can you turn to?
Well, for starters you can turn to your Realtor.  Your real estate agent has access to cold hard facts that you can then interpret together.  Some cold hard facts as of today for the San Francisco real estate market are that sales volume is MUCH lower than it was last year, meanwhile, median prices (depending on neighorhood and type of home) are either stable or increasing. 
What does all this mean?  Are we at the bottom?  Are we falling?  Are we on our way up?
I can’t say.  I don’t have a crystal ball and I can’t tell you what the future holds.  But I can say what I’ve said time and time again…
If you are looking for a short term investment with guaranteed return, real estate has really never presented that.
If your objective is long term there is very little support for a theory that you will lose in real estate, especially in the San Francisco real estate market.
Thanks for stopping by, and if you have questions about the state of the market, please contact me, I love to talk about SF Real Estate.