U.S. Home prices rose 5.8% in November, according to the S&P Case Shiller Index. That was the headline for CNBC this week. And I’m about to tell you why this probably doesn’t matter at all to you as a real estate investor.
Hi, I'm Kathy Fettke and welcome to the 2nd episode of Real Estate News for Investors.
Housing made headline news again this week, as it does at the end of every month when the widely reported S&P/Case-Shiller 20-City Composite Index is released.
This week, the Wall Street Journal’s headline said, “U.S. Home Price Growth Picks Up in November” and Marketwatch’s headline said, “Home prices accelerate at fastest pace in 16 months.”
The Marketwatch article went on to say:
"U.S. home-price gains picked up again in November, with several metro areas notching double-digit annual percentage increases. The S&P/Case-Shiller 20-City Composite Index rose 0.1% in the three months ending in November, for a 5.8% yearly increase. That was up from a 5.5% yearly gain in the period ending in October, and marked the strongest reading since July 2014.”
Now let me tell you why this simply doesn’t matter and why you shouldn’t care or be affected by Case Shiller’s report, even though this Index has become a widely reported and analyzed measurement of the housing market for nearly thirty years. In fact, few other statistics are more closely watched than the Case-Shiller by those in the housing industry and Wall Street.
First, why do you care that the AVERAGE price gain of 20 U.S. markets over one year was 5.8%? That’s as helpful as planning a ski trip in Colorado and looking up the average weather of 20 U.S. cities to figure out what to pack.
Every market is different. A sale in Denver has no bearing on a sale in Chicago. There is no such thing as a national real estate market, so giving national averages is of no value at all to real estate investors.
Real estate is local.
So you might argue that the Case Shiller index does go local. It includes data from the 20 cities it follows.
This week it reported that 3 U.S cities experienced double digit gains in November. Portland was the winner with 11.1% growth, San Francisco saw 11% growth and Denver 10.9% year over year.
Metros with the slowest price appreciation according to Case Shiller were Chicago, Cleveland, and Washington at just around 2%.
Here are more problems with the data.
Even if we honed in on one city like Portland, we still couldn’t get an accurate picture of property values if we averaged out all the sales. What if there were more sales in a high end neighborhood than a high crime area, or vice versa? An average price of two neighborhoods does not help you understand real values in the specific area you wish to purchase.
Also, I don’t know if you heard me, but I said these were sales from November. It’s almost February. Why do I care what happened in November? The Case Shiller reports on closings that happened 60 days ago.
Would you invest in a particular stock by looking at the numbers from nearly 3 months ago? You might be able to analyze the change in home prices during that time, but you’ll have to wait 2 more months to get today’s data. This does not help you if you’re trying to buy or sell real estate today.
Here are 10 reasons why the Case Shiller Index is of no help to you, as a real estate investor...
READ MORE AT www.NewsForInvestors.com
Please note, I have a great amount of respect for Dr. Shiller and do not wish to criticize his life's work. I’m sure the data could be used for analysis of certain trends - just not for today's buyers and sellers.
I actually had the opportunity to debate him on Fox news. You can see that interview on Real Wealth Network’s website: www.NewsForInvestors.com under the "About Us" tab.
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I’m Kathy Fettke, and welcome to the first episode of Real Estate News for Investors - the premiere source for the most relevant real estate stories, issues, and events that give savvy real estate investors the edge.
Unfortunately, people seem to get the wrong news right when they need it most. For example, back in 2006, right at the peak of the last market cycle - a year before it all came crashing down, the prevailing message from the media was BUY. Real estate is hot and just won’t stop.
But boy did it stop. Just a couple of years later, the U.S. suffered the largest drop in home prices since the Great Recession and the reverberations of that were felt globally.
Here are just some examples of big media sending the wrong messages.
In June of 2005, the cover of Time Magazine said, "Home Sweet Home, why we’re going gaga over real estate." It should have said, “Watch out for a Major Housing Correction Ahead.”
In September of 2010, the same magazine’s cover said, "Rethinking Homeownership: Why owning a home may no longer make economic sense." It should have said, “Opportunity of a Lifetime. Greatest Transfer of Wealth. Cash Flow and Appreciation Ahead!"
Maybe the general media can’t expect to be experts in coming market cycles. But what about the top authorities in the real estate world. What were they saying?
Unfortunately, they also got caught up in the frenzy.
David Lereah, the chief economist of NAR, published a book called, Why the Housing Boom Will Not Bust and How you Can Profit. This was published in Feb 2006.
Unfortunately, many people made poor decisions based on false or inaccurate information.
But that is all about to change, here on Real Estate News for Investors where you can stay up-to-date on market trends, best housing markets, investment in single-family rentals or multi-unit rentals, investment capital, turn-key housing standards, new laws, regulations, and economic events that affect real estate, the revered 1031 exchange and self-directed IRAs.
Find out where rents and property values are rising or falling, markets with job losses vs. job growth, areas that are overbuilt or over-supplied versus property in high demand, and how to avoid real estate scams.
We'll bring you the latest reports from organizations like the National Association of Realtors, Realty Trac, Fannie Mae, Freddie Mac, Zillow, Trulia and Redfin. And we'll help you interpret their often biased data.
You can substantially grow and protect your wealth by staying on the forefront of economic data analysis, expert opinions, innovative investing strategies and profitable investment opportunities.
On this podcast, I'll share all the top stories and trade secrets experienced and successful investors are using - so you can stay ahead of the curve and make fully informed real estate decisions.
And I promise to give you my very uncensored and totally biased opinion. And that bias is that I don’t trust regular media, I don’t trust government propaganda, I don’t trust my friend’s advice at cocktail parties or my church families' recommended investments. I trust common sense mixed with some investigative reporting, which is something I did for years in San Francisco when I was younger - at ABC News, CNN, KTVU and KSFO.
Let me tell you a little bit about me, your host of Real Estate News for Investors. I am founder and Co-CEO of Real Wealth Network, a real estate investment group with over 20,000 members and growing rapidly. I’m also the author of Retire Rich with Rentals and host of the Real Wealth Show - one of the very first podcasts on iTunes.
I am a regular guest expert on Fox News, CNBC, CNN, Marketwatch, ABC NEWS,