Are We Seeing The End Of The Recession And Is The Case-Shiller Index Proof Of That

For May, the Case-Shiller Index showed home values up in 15 of its 20 tracked U.S. markets. It's the first time in nearly 3 years that the index showed such strength and a signal that home prices may be turning higher for good.

According to a Case-Shiller Index spokesperson, "this could be a signal that home price declines are finally stabilizing."

However, just because the Case-Shiller Index indicates home values are stabilizing, doesn't necessarily make it true. Real estate is a local phenomenon and the Case-Shiller Index tracks just 20 U.S. cities.

Residents of every other town are unaccounted for.

Additionally, even within the 20 tracked cities, there are distinct neighborhoods and pockets that are under-performing the general market -- just as there are those that are over-performing. The Case-Shiller Index can't get that granular.

Despite its imperfections, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that's true, May's figures are the next step in the right direction.

Home Values Are Better Than The Press Reports

Each month, researchers measure home values in 20 large U.S. cities, then compile their findings in a report called the Case-Shiller Index. It's a popular measurement of housing health across the country, but it's far from perfect.

As 3 examples:

1.It gives more weight to expensive homes than inexpensive ones
2.Its sample set includes just 37 states of 50 states
3.Real estate isn't a "national" market -- it's local

All that said, however, the data is still important. The Case-Shiller Index helps identify broader trends in housing and it's widely believed that the economy won't recovery until the sector starts to stabilize.

We may be at that recovery point now.

Despite newspaper headlines blaring about 19 percent drops from March 2008, the month-to-month values appear to be stabilizing and the latter is the more important development. 15 of the 20 markets covered by Case-Shiller either improved, stayed flat, or declined by 0.2 percent or less.

Versus 2008, the rate of speed at which home values are falling is slowing.

Furthermore, because the Case-Shiller Index is on a 2-month delay, it doesn't account for all of this year's Spring Buyers, or first-timers taking the $8,000 first-time homebuyer tax credit.

Two months don't make a trend, but if Case-Shiller Index continues to report similar data for April and May, it could be the signal that housing finally bottomed.

Home Value Declines Slow In February - Maybe A New Trend Is Developing

The Case-Shiller Index is a popular reporting tool for the nation's home prices. Each month, researchers measure home values in 20 large cities, compile their findings, and then publish them to the public.

The Case-Shiller Index is not a perfect measurement by any means. It gives more weight to expensive homes than inexpensive ones, for example, and its sample set includes just 37 states. But that doesn't diminish its importance to the housing sector.

Because the Case-Shiller Index comes from the private sector, it's an excellent counter for the U.S. government's home value reporting tool -- the House Price Index.

In this current market, the Case-Shiller Index tends to report housing in a more negative light than does the government. This doesn't make either method more accurate, it just provides a helpful point/counter-point.

And that's why February's Case-Shiller Index is so important.

Despite reporting falling values in each of its 20 tracked cities, the Case-Shiller Index showed values falling with a lesser speed and intensity than in months prior.

It's a small victory, but if the Case-Shiller Index shows that home prices are starting to mend, you have to pay attention -- especially because the index is on a 2-month delay and doesn't account for Spring Buyers or the $8,000 first-time homebuyer tax credit.

One month doesn't make a trend, but if often-negative Case-Shiller Index turns in similar numbers for March, it could be the signal that housing has bottomed.