One of the essential tools measuring the pulse of the housing industry is the Standard & Poors Case-Shiller Index.  It measures the residential housing market in 20 top metropolitan areas across the U.S.

 The index was developed by Karl Case of Wellesley College and Robert Shiller of Yale University in the early 1980s.   It collects repeat sales prices for single family homes each month and indexes it to prices in 2000.  The top 10 and 20 market indices are then averaged into composites.  Case-Shiller also publishes a composite for the 9 regions within the U.S. The prices are published with a two month time lag.

 Even though the index does not include foreclosures or new construction, it does give a good indication of the impact of foreclosures or new housing on the health of the market.  Where there are large numbers of foreclosures normal retail resales tend to fall in prices.  When there is a lot of new construction going on, housing prices tend to rise rapidly.

 The index is compiled by Fiserv, Inc. and published by Standard & Poors.  Fiserv also produces indices by zip code using the Case-Shiller methodology.

 The Case-Shiller index is one of the major measures of the economy’s health.  As of December 2008, while every metropolitan area showed a continuing decline, there was some decrease in the rate of decline in some markets including San Diego, Boston, and Washington, D.C.  Boston fell in the seasonally adjusted average by only .46% in December, while the drop was 2.75% in October/November. In San Diego the December monthly drop was 1.83% and the drop between October and November was 2.60%.  The drop in Washington, D. C. was a little more precipitous at 3.10%, but that was less than the drop from October to November of 4.06%.

 Overall, the 20 metropolitan areas still have seen a 50.40% increase in the value of homes since 2000, but a drop from the high in April 2006 of 45.10 points, or a 22% drop in the past nearly 3 years.

 Since January 2008 several cities have seen a precipitous drop, while others have barely lost ground.  The one year drop in the top 20 metropolitan areas is ranked as follows:

The percentages for cities with high levels of foreclosure, including Las Vegas, Phoenix, Los Angeles, Detroit, Miami, and Tampa would be worse if foreclosures were figured in the totals. 

 It is hard to see any silver lining in these figures or to judge trends based on a couple months of changes.  When we see a quarter of slowed declines or flat prices in the markets that began to fall early in the recession we’ll have a more hopeful indication that the housing market is beginning to turn.  Watch particularly the trends in Miami, Tampa, Los Angeles, Las Vegas, Detroit, and Phoenix, because these were some of the early foreclosure areas.  When we see a slowdown in the housing slide in these metro areas, we’ll have a pretty good indication that the bottom has been reached.