Valuing Homes ex-Foreclosures

Here’s a little bit of pushback on the indices showing how terribly elevated home prices are, and why they likely have more to fall.

The WSJ Numbers Guy column, written by Carl Bialik, looks at various indices — Case Shiller, OFHEO FHFA, etc. As the charts at bottom reveal, they all show a boom, elevated prices and a rollover.

“The one point of widespread agreement in the real-estate industry is that there is no single accurate index of home prices. They are all over the map, cover different sets of homes and may exclude parts of the country or be unduly influenced by the mix of homes sold in a given month.

As the home market surged earlier this decade, the two leading indicators of home prices diverged. One didn’t count homes sold with exotic or subprime mortgages, which fueled much of the bubble. These same properties are often the ones going on the auction block today at severe discounts, pulling the other home-price index down — some say to unrealistic lows.

To address these discrepancies, indexes are going increasingly local. Other, less-well-known measures of home prices — some of them available only to paying customers — are adjusting to exclude homes sold by banks.”

I would appreciate it if someone could explain to me the value ofexcluding Bank REOs, foreclosures, and all discounted sales.

To me, this is just the latest variation of inflation ex inflation . . .



Only One Person Knows a Home’s Value: Its Buyer
WSJ, NOVEMBER 21, 2008, 12:41 A.M. ET

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