| NEW YORK, March 30
NEW YORK, March 30 Most closely watched U.S.
home price measures lack enough local data to truly reflect
house values and are overstating the extent of price drops,
executives at a real estate analytics firm said on Monday.
Some key markets in those indexes are dominated by
distressed foreclosure sales, exaggerating the price weakness
that is often extrapolated to the national market, the
co-founders of Collateral Intelligence said on a conference
call conducted by UBS.
Closely watched indexes cited by the firm's co-founders,
Michael Sklarz and Norm Miller, included those provided by
Standard & Poor's/Case-Shiller, U.S. regulator the Federal
Housing Finance Agency -- formerly the Office of Federal
Housing Enterprise Oversight (OFHEO) -- and the National
Association of Realtors.
"Some of the widely followed indexes such as Case-Shiller,
OFHEO, NAR and so on are way too broad to be meaningful," said
Sklarz, the Honolulu-based president of Collateral Analytics as
well as a co-founder of Collateral Intelligence.
"To properly track the real estate market you really need
to get down to all the local markets," Sklarz said. "Now we
have the tools to properly track that. So why track these
overly simplistic indicators that can be very biased, as they
are in the current environment, when there's so many more
complicated things going on in the market?"
Collateral Intelligence does not publish competing monthly
indicators. Collateral Analytics is preparing to launch an
index, a spokesman said, without specifying the timing.
While the S&P/Case-Shiller regional indexes show a 26
percent slide in prices since the peak in mid-2006 and the S&P
national index shows a more than 18 percent in the 2008 fourth
quarter from a year earlier, Miller said a more realistic
estimated drop is in the 12 percent to 15 percent range for the
"What we find is that on the way down, Case-Shiller
overestimates the decline by about 10 percentage points or so,
and on the way up will do the same thing," said Miller, who is
a professor at the University of San Diego's Burnham-Moores
Center for Real Estate as well as a co-founder of Collateral
The typical homeowner's price change probably is about 50
to 60 percent of the downturn shown by the index, he said.
David Blitzer, chairman of the index committee at S&P,
defended the S&P indexes. "We believe that our indices are
accurate and reliable and provide a fair representation of
what's going on in housing in the United States," he said.
As for the question of foreclosures or distressed sales
distorting the indexes, Blitzer said they must be included. "If
you only want to include cases where people hold out for the
best price, you'll get a much happier index but it would not be
an accurate representation of the market."
The S&P/Case-Shiller indexes of 10- and 20-metro area home
prices for January will be reported on Tuesday.
Sklarz and Miller said the existing indexes often lack the
zip code and neighborhood details that prove that housing is
local, not national, and most of the measures are not
comprehensive in terms of loan sizes and quality.
Inventory levels and the number of days a house sits on and
the number of days a house sits on the market before being sold
or delisted need to be looked at closely as more fundamental
concerns like unemployment, they said.
Some individual housing markets are bottoming now, and some
will in the next year to 18 months, Sklarz and Miller said on
the conference call.
The key question is whether President Barack Obama's
economic stimulus will stymie the leap in joblessness that
keeps the housing market from turning around, they said.
Unemployment is at a 25-year high and has yet to peak.
Sklarz and Miller estimate that within a half a year defaults
and foreclosures will reach their cyclical highs.
(Editing by Leslie Adler)