Home Price Data Sources

I'm often asked my views on the real estate market. I have recently helped clients find and analyze several sources of data for presentations, interviews and RFPs. My impression is, even three years into the real estate downtown, many need help with understanding the high profile reports. So here are some comments on two.

Case/Shiller's home price trend is freqently cited to assess trends in home values. The index was developed by two very smart guys, one of whom predicted the real estate crash at least 3 years ahead of time. Case/Shiller tracks and reports on 20 cities to assess national trends - when reported (as today) the press surely takes notice, especially if it's a downer.

FHFA, fomerly known as OFHEO (I'm sure that helps!) reports its home price index (HPI) quarterly, and monthly in abbreviated form. The HPI reports changes in home values for the most recent quarter, year and 5 years. Instead of 20 cities, FHFA reports on 379 areas - called metropolitan statistical areas (MSAs). The data used to develop the HPI comes from 35 million Fannie Mae and Freddie Mac loans made.

While FHFA does not report trends on jumbo loans (homes above $700K), it does provide a much broader geographic reach than Case/Shiller. Further it ranks the top 20 and bottom 20 performing markets, and provides many good graphs and maps illustrating trends by region, by state, and other factors. FHFA is free.

Both are valuable, as are reports from LPS, DataPoint, Altos and others. One challenge for folks is "what do I do with all this information?" (that's where we come in at Hayden Moore)

History For The Day

The Roman Consul Cicero said those who do not learn History remain forever children. He was offering advice to prospective public servants of the Roman republic. With a far less grand entrance, I will periodically offer entries on our past that I hope you find interesting.

Our founders struggled through the summer of 1787 to create our Constitution. The delegates held meetings in secret presided over by George Washington. Hamilton and Madison played key roles. So did Ben Franklin. Jefferson and Adams were in Europe and did not participate except by (long delayed) letters.

When the new Constitution was published in September, there was an outcry from those who favored a weak national government and strong state governments. They saw the new structure as dangerous to state influence, launching a debate that has simmered ever since. Within ten days of publication, opposing anonymous essays began appearing in the newspaper. Hamilton, Madison and John Jay began writing responses over the pen name "Publius". These essays not only parried the critics, they provided a document to which we still refer for insight on the structure of our government. The collected essays became known as "The Federalist Papers".

The so-called Anti-Federalists and Publius debated in the newspapers for nine months, mostly in an effort to persuade New York State to ratify the Constitution. It didn't help that Gov. George Clinton, writing as Cato in opposition, was sharply opposed. One of the main objections of Clinton, Patrick Henry and others was the lack of a Bill of Rights.

In the end, the Constitution was ratified by 12 of 13 states, some by only a few votes. Several states - Virginia, New York, Massachusetts, New Hampshire - ratified but insisted that a Bill of Rights (which they went to great pains to list) must be added during the first Congress. James Madison drew up the first ten amendments that became our Bill of Rights.

Reading the exchange between the Federalists and Anti-Federalists, I was struck by the principled and disciplined arguements presented. Their guides were those in the past who succeeded, those who failed. They knew this was serious business: they were not merely conducting a philosophy seminar, they were making a nation.

Complexity Matters

Every assignment is different. Every home is sited on its own unique parcel of real estate, in a singular market and affected by perhaps profound local influences. The complexity of a home sale assignment should have an impact on how you manage it - even how you organize your operation.

Be careful not to assume a counselor with 2 years experience can handle equally well low and high complexity home sale assignments. If you develop a complexity estimate, or score, it will help you apply the right resources when they matter.

Let's say, for example, a low complexity score is 20 and a high score is 70. Size, price, competition, market factors, trend of the market (using data like FHFA), amenities, location all contribute to developing the score. Take into consideration how much market inventory at the price range is on the market (12 months today is not uncommon).

So for your property scoring 70: Assign a counselor with skills and experience that match. Consider assigning a risk manager type to tag-team with the counselor. Select realtors with demonstrated ability to move high complexity properties within time goals, and at good sale price results - based on metrics. Create appraiser lists using only those who are accurate at the higher complex properties - overall variance as a measure may not be good enough.

Pre-decision tools can help make the assessment even before home sale begins. But this is not a place, or market in which to eyeball it. Develop a quantitative tool that informs all involved, and that will also be an aid in transferee and client discussions.

On every completed assignment, conduct a review of the transaction. Use it to inform your operations process, and to develop policy recommendations.

More soon...

What you can expect

Welcome to our blog site. We'll be sharing with you insights on how to manage the various aspects of risk in the relocation industry. What we develop as part of our consulting, and what we learn about effective practices in the industry will be posted for your information. We encourage you to visit frequently and comment any time you like.

Our intent is to look at home sale issues initially. Risk management is, in our view, many faceted and creates a broad spectrum to consider and discuss. We see process, property complexity, market data, operations, performance measurement, realtor and appraiser selection, and risk transfer as worthy of attention.

Inevitably, we together will venture beyond home sale issues, and will consider products and services that can enhance service delivery and expense management. Your comments will surely help to set our direction.

Next time we intend to discuss the various sources of home price/value market data and describe some of the distinctions between - for example - the Case/Shiller Index and the FHFA Home Price Index. We'll also share our views on how assignment complexity affects the way relocation home sale is managed.

Thanks again, and we look forward to hearing from you.