Market Update: Predicting Case Shiller numbers for August and September
The need for real-time residential real estate data has never been greater.
The need for real-time residential real estate data has never been greater.
The need for real time residential real estate data has never been greater, and Parcl Labs is ready to meet this challenge head on.
On Tuesday, October 25 at 8:00am the S&P/Case-Shiller Home Price Indices will update with August numbers. On Tuesday, November 29 at 8:00am, numbers for September will be reported.
We at Parcl Labs didn’t feel like waiting to see what’s happening in housing markets across the US, and decided to take a look into the future. We used our real time Parcl Labs data, reconstructed what we could glean from the opaque Case Shiller methodology, and predicted the numbers that will be reported for all Case Shiller 10 metro areas for both August (scheduled to be reported on October 25th) and September (November 29th). This report gives us insight into how markets are evolving for single family, repeated sales homes that fall outside the definition of home flipping (turnover time of less than 6 months) during what is one of the most volatile periods real estate has ever experienced.
While the expectation is that residential real estate prices as tracked by the Case Shiller will decline for a second consecutive month in August, the magnitude of this decline is likely to be considerable. According to our estimates, we expect this period to be the second largest contraction in the history of the Case Shiller 10 for most markets, with 2008 rates of decline being only slightly steeper.
The decline in prices has affected the activity in 9 of the 10 markets tracked by the Case Shiller, with New York being the only market with a moderate price appreciation of 60 basis points. Parcl Labs data shows dramatic MoM declines in regions such as San Diego, San Francisco and Denver; registering declines of 3.1%, 2.3% and 2.0% respectively from July to August. To put this in perspective, since the beginning of the index, the average change month to month across all 10 markets is 40 basis points. Our estimates indicate that:
At Parcl Labs, we use 3x the amount of available data to provide real time pricing dynamics at any level of geography. Our estimates, with more data, and looking at all types of homes, indicate that the decline in prices in the month of August on a MoM basis could be as high as 6.8% percent for San Francisco, 4.7% percent in Las Vegas and 3.9% percent in Denver.
The downturn is affecting markets as diverse as Boston, Las Vegas, Washington DC, and Los Angeles with the steepest contractions recorded in a decade. With interest rates at their highest levels in more than 20 years, we can expect further contractions in the coming months. This is precisely what Parcl Labs Case Shiller 10 estimates show for September, with 7/10 markets continuing a downward trend into September:
The situation is more volatile than the Case Shiller suggests, as the index does not reflect current market conditions. It takes months for the Case Shiller to accurately reflect what is happening on the ground at present, and by the time Case Shiller updates, there will be over two full months of new real estate trends. Even with our predictions for August and September, these predictions are conflated with the previous three months of data, based on the CS methodology, causing the index to move slowly relative to felt pricing dynamics today. Perhaps the more damning fact about this is the available data points, or lack thereof, and hence the reduced accuracy of the estimates that Case Shiller uses when providing a snapshot of the market.
We carefully track our estimates against published numbers. Outlined below is our error rates for 2022 for the CS-10 metro areas.
Applying these error rates to our August estimates gives us a range of possible values we feel the Case Shiller indices will fall within:
Having rich insight into what is happening in your real estate markets is a problem for today, not one to revisit months from now. Parcl Labs has created a real-time real estate price feed for any level of geography, using upwards of 3x as much residential real estate information than other indices to make contextually driven, real time analysis possible.
We are making this available to you in a performant API designed from the ground up for forward thinking, data driven real estate professionals. You can register here for early access to our API and start getting insight into your markets well ahead of others.
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Co-authored by Chief Data Officer Jason Lewris and Principal Data Scientist, Jesus Leal Trujillo
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