This is a rather technical note, probably of little interest to most readers. The most recent release of the Case-Shiller house price index (HPI) came out yesterday. The results were, unsurprisingly, not particularly good.
However, this reminded me that we should consider ourselves rather lucky to have such good data on house prices. During the inflation of the housing bubble in the first half of the 2000s, it was difficult to get reliable and detailed data on house prices in the US. The best data that was publicly available was a quarterly dataset put out by the Office of Federal Housing Enterprise Oversight (OFHEO), which has since been renamed the Federal Housing Finance Agency (FHFA). However, the OFHEO/FHFA HPI had certain shortcomings, primarily having to do with the fact that its analysis is restricted to houses with non-jumbo mortgages, so its results had to be used with a bit of caution.
Then along came the Case-Shiller HPI, which avoided the principal shortcomings of the OFHEO HPI. It wasn't publicly available until 2007, but now is released monthly. I've been curious about how different the two indexes are, or put another way, how flawed the OFHEO/FHFA data is when compared to the Case-Shiller HPI, which is widely considered to be more accurate.
The following table summarizes the differences between the two indexes over the past decade. I split the analysis into several major cities and two different periods to get a bit more texture.
I'm a bit surprised that the two indexes have been as close as they have been. No, they're not identical, and in one case the difference between the two reaches 10%. But overall, I'd say they match pretty well, particularly for something as inherently difficult to measure as house prices. It's always reassuring when two different methodologies come up with roughly the same answer.