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How Accurate is the S&P Case/Shiller Home Price Index?

It seems like good news. For the first time in eight months, the S&P Case/Shiller Home Price Index reported that home prices rose in 13 of 20 cities covered by the Index.

Before you start feeling all warm and fuzzy all over, or start counting your home equity dollars, it's important to understand why the news isn't really all that good. Take a peep below the hood at these findings:

  • Home prices barely budged off of all-time lows, according to the Index. Prices in the 20-city index rose .7 percent (that's seven-tenths of one percent), while prices in the 10-city Index rose .8 percent).
  • Home prices in six cities fell to new all-time lows including Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa.
  • Homes in Cleveland, Detroit and Las Vegas are worth less than they were in January, 2000 and home prices in Phoenix and Atlanta are close to where they were in 2000, meaning homeowners there have lost 11 years of home value increases.
  • Washington, D.C. remains one of the strongest housing markets, with prices up 3 percent month-over month, and an annual price increase rate of about 4 percent. But every other city in the index is showing prices below where they were a year ago.
  • Home prices in Minneapolis are 11.1 percent less than a year ago.
"In a welcome shift from recent months, this month is better than last - April's numbers beat March," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the Spring-Summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather."

But you wouldn't want to necessarily apply for a home equity line of credit just yet: "For a real recovery we would need to see several months of increasing home prices, large enough to shift the annual momentum to the positive side. In short, better news, but still a lot of questions and a long way to go," Blitzer said.

One question that needs to be addressed is how much the slowdown in foreclosures is affecting home prices.

I had lunch this week with a housing industry insider who said he is hearing that banks are going into court and asking the judge for a 6-month stay. Why? They can't locate documents that courts are now requiring them to produce in order to process foreclosures. The bank's word that they own the property simply isn't good enough anymore (not that it should have ever been).

That slowdown in foreclosures means fewer foreclosures for sale at prices that will push down the S&P Case/Shiller Home Price Index. If a slowdown in foreclosure filings is what is pushing up home prices, the effect will be temporary.

For those who believe that the phrase "long tail" just applied to search, here's a new reality: The housing crisis, which started in 2006, is now in its sixth year. As my lunch companion put it, we could be in the middle of a 10-year cycle - which might mean that the housing industry would improve in another 4 years or so, maybe around 2016.

But here's another thought: We haven't even hit bottom yet, and we've still got another 10 years to go until we're back to where we were. Uh, that would bring us to 2021.

Chip Case, one of the founders of the Index, has been known to say that when the housing market turns, there's a whistle that sounds that only "dogs and home buyers can hear." Let's hope someone blows that whistle sooner rather than later.

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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at and The Equifax Personal Finance Blog, and is Chief Content Strategist at, a community for real estate investors.