Tuesday, December 29, 2009

Inconsistent reporting on housing prices

I was surfing through the business web-sites this morning and came across two contradictory headlines regarding the just-released S&P Shiller/Case housing price numbers.

CNNMoney.com reports "Bad news for housing: Prices flattening."
Home price gains earlier this year flattened out in October, according to a report issued Tuesday.

The S&P/Case Shiller Home Price index, covering 20 of the largest metropolitan areas in the nation, was unchanged in October, after four consecutive months of gains. The index is down 7.3% from 12 months earlier.
The CNNMoney story buttresses this interpretation with the following negative quote from David Blitzer from S&P.
The turnaround in home prices seen in the spring and summer has faded ... Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip.
However, Bloomberg.com cheerily reports "Home prices in 20 U.S. Cities rose for the fifth month" (emphasis added).
Home prices in 20 U.S. cities rose in October for a fifth consecutive month, putting the housing market and economy farther along the path to recovery.

The S&P/Case-Shiller home-price index increased 0.4 percent from the prior month on a seasonally adjusted basis, after a 0.2 percent rise in September, the group said today in New York. The gauge was down 7.3 percent from October 2008, the smallest year- over-year decline since October 2007. The median forecast of economists surveyed by Bloomberg News anticipated a 7.2 percent drop.

Did prices go up or go down? Is the news good or bad?

Both stories draw from the same press release from S&P which states
Data through October 2009, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices ... show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month’s reading. This marks approximately nine months of improved readings in these statistics, beginning in early 2009.
The difference in the stories seems to come down to different numbers in the press release (and in the case of CNNMoney, some selective quoting).

The S&P press release indicates that the seasonally-adjusted 10- and 20-city indices rose in October but the unadjusted indices did not. If we are going to read month-to-month changes, we should focus on the seasonally-adjusted numbers.

Also, the quote from David Blitzer actually comes from the press release. The full quote is
The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat... Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip. Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today. Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010.
Blitzer's quote is much more nuanced and conditional than the CNNMoney reporter lets on. Blitzer interprets the data as "flat," but also indicates that the "worries" about a "second dip" are not likely to play out.

CNNMoney's reporting seems to be incomplete and misleading. The CNNMoney story never mentions the seasonally-adjusted numbers and quotes selectively.