(See recent posts on Phoenix Case-Shiller Home Price Index.)

John Burns runs a real estate economics consulting company that targets home builders, although he has many non-builder clients. John Burns Real Estate Consulting always has interesting free analysis. Just keep in mind they have a bit of a builder-centric view of the real estate industry so they sometimes seem a bit cheerleaderish for the builders.

(Full Disclosure; I’m not pro-Arizona home builders. Those whack jobs built an extra year’s supply of homes during the boom and kept going on their building binge long after the party was clearly over. Arizona home builders were a major, major factor in the real estate boom and bust in Arizona. Of course, the owners of many home builders and their executives made bloody fortunes during the boom and then retired (which was rational). And then to “save” the industry, the Feds gave the home builders back all the taxes they paid during the boom! Would you like to get that deal?)

Real Estate Geek Alert!

John has a newsletter that all real estate geeks should subscribe to. Although most issues are kinda interesting, they occasionally hit a home run.

Here’s the issue complaining about the problems with Case-Shiller numbers and the median home price, which amazingly, is not on their website! (At least I can’t find it.)

John points out a weakness in the Case-Shiller numbers that I hadn’t really focused on.

The Case-Shiller Index will tend to show home prices increasing when only the prices in the lowest priced neighborhoods are increasing, even if home prices in the rest of the market are flat.

Because the mix of what was transacting shifted to the lower priced homes in the worst neighborhoods. That mix shift pulled the median price down, but those low-priced homes were appreciating rapidly, so CS (an index that compares price appreciation on the same house from when it last sold) went up.

And that’s the situation in Arizona.