The Golden Age Of Information

June 06, 2006

Housing prices going up??? Investors going to cash??? Wheat prices on the wise??? It’s a good time to be an information junky.

One of the great things about all these new indexes and index-related products is that they provide you with so much fantastic information.  If you're an information junky, like I am, this is the Golden Age.

Take the S&P/Case-Shiller housing price indexes (and the related futures contracts), which hit the market just last month.  In the past, the only way I had to gauge the health of the real estate market was to look around town and see how many houses were for sale, or to talk to a few real estate agent friends, or to pick up some gossip at the local hardware store.

But now … va-va-voom!  The S&P/Case-Shiller indexes and related futures tell me everything I need to know, and more.

For instance, S&P/Case-Shiller just announced the preliminary index results from the month of March.  Year-over-year, all 10 major metropolitan areas, as well as the national composite, posted positive returns.  Those returns were led by Miami, where prices rose 27.4 percent; Boston was the laggard, with prices up just 0.1 percent.  The market sure doesn't feel that buoyant.

Then again, maybe it's not.  The one-month change in prices between February and March shows two cities posting month-over-month declines (Denver and New York), with most other areas registering very small upticks. Miami continues to lead the pack with a 0.8 percent rise, but nationally, prices rose 0.1 percent.

 Metropolitan Area

March 2006

February 2006

1-Month Change (%)

March 2005

1-Year Change (%)

 Boston

177.12

176.28

0.5%

176.92

 0.1%

 Chicago

164.95

164.71

0.1%

151.85

 8.6%

 Denver

136.93

137.12

-0.1%

132.73

 3.2%

 Las Vegas

232.38

231.94

 0.2%

210.98

10.1%

 Los Angeles

268.23

267.74

 0.2%

226.75

18.3%

 Miami

274.50

272.39

 0.8%

215.45

27.4%

 New York

212.57

213.45

-0.4%

192.14

10.6%

 San Diego

248.09

247.89

 0.1%

236.56

4.9%

 San Francisco

216.03

215.56

 0.2%

198.27

9.0%

 Washington, DC

248.94

248.42

 0.2%

217.86

14.3%

 Composite

223.31

223.15

 0.1%

199.20

12.1%

That still doesn't quite jibe with my sense of the real estate market.  Where I live, a lot of houses are staying on the market for a long time.  But if you dig under the top line numbers in the indexes, you see that they're telling that story, too.

Ed Hynes of Farm Creek Securities (a regular contributor to this site) has been following these indexes more closely than anyone I know, and has been doing a great job looking underneath the front-line data. And what Ed sees is not nearly so happy.

Consider New York.  In his most recent commentary, Ed wrote:

"On an annualized basis, NY metro area prices are up: 7.7 percent in the past six months; unchanged over the previous 3 months; and down 4.8 percent from the prior month's data. These results are even more discouraging given a seasonal pattern where prices tend to increase in the spring, especially in Northern cities like New York."

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