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«DiscoVeriNg HomelessNess Volume 13, Number 1 • 2011 U.S. Department of Housing and Urban Development | Office of Policy Development and Research ...»

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Further, NAR’s publicly available quarterly metropolitan price report provides the estimates of the NAR median home price for the past five quarters and the past 3 years, not seasonally adjusted (NAR, 2010b). The full time series is not publicly available, but it can be acquired at a cost.

Comparison of Four-Quarter Change Rates of the House Price Indices for 10 Metropolitan Areas This article conducts a correlation analysis of the four-quarter change rate for the five indices discussed in the previous section for two time periods: the third quarter of 2006 through the third quarter of 2007 and the first quarter of 2007 through the first quarter of 2008. The analysis was performed for 10 metropolitan areas: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, D.C. (see exhibits A-1 and A-2). The choice of the time periods and of the metropolitan areas was limited by the availability of data.

For comparability with the other house price indices, which are estimated only for single-family homes, this analysis considers the Zillow Home Value Index for single-family homes and the NATIONAL ASSOCIATION OF REALTORS® (NAR) Median Sales Price of single-family homes.

The change rate of the Zillow index correlates very highly with the change rates of the S&P/ Case-Schiller®, with change rates of 95 percent for the first period and 92 percent for the second period (see exhibits A-3 and A-4). Although the adjusted HPI was constructed to align as close as possible with the S&P/Case-Schiller®, its change rate has an 87-percent correlation coefficient with the change rate in S&P/Case-Schiller® during the first period, which is lower than the Zillow index.

The change rate of the Zillow index also correlates at a high level with the adjusted HPI’s inflation rate (84 percent in the first period and 88 percent in the second period). The change rate of the NAR median home price has the lowest correlation with the other four indices, but its degree of association improves substantially in the second period.

Spatio-Temporal Indicators This section develops a set of spatio-temporal indicators based on the four-quarter appreciation rates for the HPI for 302 metropolitan areas for the period from the third quarter of 1990 through the third quarter of 2007. These indicators are based on the concepts of spatial and serial autocorrelation. The analysis shows that from 1998 until 2003 and 2004, the spatio-temporal indicators intensify in value and then drop off after that period.

Cityscape 171Schintler and Istrate

Robert Shiller and other economists have used serial autocorrelation to measure irrational exuberance in financial bubbles. Because of the spatial nature of the housing market, the results of this analysis reveal that a geographic component to the housing bubble may have existed. To capture these indicators, Global Moran’s I statistic was used. This statistic is the spatial counterpart to serial autocorrelation in a time series (Anselin, 1995). It ranges from -1 to 1, where negative values indicate a checkerboard pattern in the phenomenon being analyzed and positive values indicate just the opposite—that is, spatial clustering of similarly valued units, either high value homes adjacent to other high value homes or low value homes adjacent to other low value homes. This study also develops a spatio-temporal autocorrelation indicator to capture space and time simultaneously.

To use the Moran’s I statistic, an adjacency matrix needed to be defined to specify how the geographic units are positioned in space. In this analysis, the first-order queen rule of adjacency was used—the rule that is most commonly applied to polygon data such as the metropolitan HPI data.

Exhibit 2 shows the Moran’s I statistic, the temporal lag, and the combined lag for percent changes in HPI for 302 metropolitan areas going back to 1988. A clear rise and then drop in all three indicators occurred throughout the housing bubble and subsequent burst, although the peak is much less than expected, given the cap on Fannie Mae and Freddie Mac loans.

–  –  –

Spatio-Temporal Indicators, 1990 Through 2007 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 –1 –1 –1 –1 –1 –1 –1 –1 –1 –1 –2 –2 –2 –2 –2 –2 –2 –2 We use local indicators of spatial association (LISA) to provide additional insight into the spatiotemporal dimension of the housing bubble. This map highlights five possible types of spatial association: high values surrounded by high values (high-to-high), low-to-low, high-to-low, low-to-high, and no significant association.

The LISA map shows that metropolitan areas in certain regions (the Northeast, Florida, and California) have become more similar in HPI changes over time. The maps in exhibit 3 represent regional bubbles where house prices accelerated up to a certain point before bursting. In these areas, the last map of 2006 to 2007 shows the reversal in terms of a switch to low-to-low association.

In each map, the large square indicates a high-to-high association, the large circle is a low-to-low association, the small circle is a low-to-high association, the small square is a high-to-low association, and the hollow circle is insignificant association.

Exhibit 3a Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2000 Through Third Quarter of 2001 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.





Source: Office of Federal Housing Enterprise Oversight (2007a)

–  –  –

Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2001 Through Third Quarter of 2002 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a) Exhibit 3c Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2002 Through Third Quarter of 2003 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a)

–  –  –

Exhibit 3d Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2003 Through Third Quarter of 2004 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a) Exhibit 3e Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2004 Through Third Quarter of 2005 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a)

–  –  –

Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2005 Through Third Quarter of 2006 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a) Exhibit 3g Spatial Association of the HPI Four-Quarter Appreciation Rate for Metropolitan Areas, Third Quarter of 2006 Through Third Quarter of 2007 HPI = The Federal Housing Finance Agency (FHFA) All Transactions House Price Index.

Source: Office of Federal Housing Enterprise Oversight (2007a)

–  –  –

Conclusion This article shows that none of the analyzed house price indices is best suited for a broad spatiotemporal analysis at the metropolitan area level. An indication exists that shows the S&P/CaseSchiller® might have tracked the housing bubble and bust better than other traditional house price indices (the HPI, the NAR median home price). The S&P/Case-Schiller® has very limited metropolitan coverage, however. The four-quarter appreciation rates of the adjusted HPI and the Zillow index correlate highly with the change rate of the S&P/Case-Schiller® during the two periods analyzed in this article. Although the adjusted HPI is limited in its release, the Zillow index is based on a proprietary valuation model. Ultimately, the only house price index that has broad temporal and spatial coverage and a validated methodology is the HPI, which has not performed as well at the S&P/Case-Schiller® during the last couple of years. This analysis points towards several ways to improve the available house price indices, from the extension of the adjusted HPI to more metropolitan areas and a regular release, the estimation of the S&P/Case-Schiller® for more metropolitan areas, and the release of the Zillow valuation model.

–  –  –

Authors Laurie Schintler is an associate professor in the School of Public Policy at George Mason University.

Emilia Istrate is a Ph.D. candidate in the School of Public Policy at George Mason University.

References Anselin, Luc. 1995. “Local Indicators of Spatial Association—LISA,” Geographical Analysis 27: 93–115.

Berube, Alan, William Frey, Audrey Singer, and Jill Wilson. 2010. State of Metropolitan America.

Washington, DC: The Brookings Institution.

Bishop, Paul C. 2008. U.S. Existing Home Prices: Data Collection and Methodology. Paper presented at the Housing Statistics Users Group, January 16, 2008. Washington, DC: National Association of Home Builders.

Board of Governors of the Federal Reserve System (Federal Reserve). 2008. Monetary Policy Report to the Congress. Washington, DC: The Federal Reserve System.

Calhoun, Charles A. 1996. OFHEO House Price Indexes: HPI Technical Description. Washington, DC:

Office of Federal Housing Enterprise Oversight.

Case, Karl E., and Robert J. Shiller. 2003. “Is There a Bubble in the Housing Market?” Brookings Papers on Economic Activity 2: 299–362.

———. 1989. “The Efficiency of the Market for Single-Family Homes,” The American Economic Review 79: 125–137.

–  –  –

Fannie Mae. 2009. Historical Conventional Loan Limits. Available at http://www.fanniemae.com/ aboutfm/pdf/historicalloanlimits.pdf;jsessionid=BWWYEFRI351MJJ2FECISFGQ.

Federal Housing Finance Agency (FHFA). 2010a. Revisions to FHFA’s House Price Index in the Recent National House Price Boom and Bust. Available at http://www.fhfa.gov/webfiles/15394/ HousePriceCyclesandHPIRevisions2310.pdf.

———. 2010b. House Price Index—Frequently Asked Questions. Available at http://www.fhfa.gov/ Default.aspx?Page=196.

———. 2010c. Quarterly Data, All-Transaction Indexes—Metropolitan Statistical Areas and Divisions Through 2010Q1 (not seasonally adjusted). Available at http://www.fhfa.gov/Default.aspx?Page=87.

———. 2010d. Quarterly Data, All-Transaction Indexes—U.S. and Census Divisions Through 2010Q1 (not seasonally adjusted). Available at http://www.fhfa.gov/Default.aspx?Page=87.

Goldfarb, Zachary A., David Cho, and Binyamin Appelbaum. 2008. “Treasury to Rescue Fannie and Freddie,” Washington Post, September 7. Available at http://www.washingtonpost.com/ wp-dyn/content/article/2008/09/06/AR2008090602540.html.

Himmelberg, Charles, Christopher Mayer, and Todd Sinai. 2005. “Assessing High House Prices:

Bubbles, Fundamentals and Misperceptions,” Journal of Economic Perspectives 19: 67–92.

Humphries, Stan. 2008. Zillow Home Value Index Compared to OFHEO and Case-Shiller® Indices.

Available at http://www.zillow.com/blog/zillow-home-value-index-compared-to-ofheo-and-caseshiller-indexes/2008/03/18/.

Joint Center for Housing Studies. 2008. The State of the Nation’s Housing. Appendix Tables:

Table W-3. Median Single-Family Home Prices by Metro: 2003–2007. Cambridge, MA: Harvard University, Joint Center for Housing Studies.

Krugman, Paul R. 2005. “That Hissing Sound,” The New York Times, August 8, 2005.

Leventis, Andrew. 2007. A Note on the Differences Between the OFHEO and S&P/Case-Shiller® House Price Indexes. (July). Washington, DC: Office of Federal Housing Enterprise Oversight. Available at http://www.fhfa.gov/webfiles/1160/notediff2.pdf.

NATIONAL ASSOCIATION OF REALTORS® (NAR). 2010a. Existing Home Sales Methodology.

Chicago: NATIONAL ASSOCIATION OF REALTORS®. Available at http://www.realtor.org/ research/research/ehsmeth.

———. 2010b. Metropolitan Area Prices—Current Report: Single Family, First Quarter 2010.

Available at http://www.realtor.org/wps/wcm/connect/497de980426de7ccb96eff03cc9fa30a/ REL10Q1T_rev.pdf?MOD=AJPERES&CACHEID=497de980426de7ccb96eff03cc9fa30a.

———. 2008. Current Report: Single-Family 1st Quarter 2008, Metropolitan Area Prices. Chicago:

NATIONAL ASSOCIATION OF REALTORS®.

Office of Federal Housing Enterprise Oversight (OFHEO). 2008a. Revisiting the Differences Between the OFHEO and S&P/Case-Shiller® House Price Indexes: New Explanations. Available at http://www.

fhfa.gov/webfiles/1163/OFHEOSPCS12008.pdf.

–  –  –

———. 2008b. Quarterly Data, All-Transaction Indexes—Metropolitan Statistical Areas and Divisions Through 2008Q1 (not seasonally adjusted). Not available on line any longer because of quarterly revision.

———. 2008c. Reconciliation of OFHEO–S&P/Case-Shiller® Indexes: 2008Q1—Table Updates Information Provided With January 2008 Paper on the Differences Between the Indexes. Available at http://www.fhfa.gov/webfiles/1162/Reconciliation_Table_2008Q1.pdf.

———. 2007a. Quarterly Data, All-Transaction Indexes—Metropolitan Statistical Areas and Divisions Through 2007Q3 (not seasonally adjusted). No longer available on line, due to quarterly revision.

———. 2007b. Adjusted OFHEO Indexes—Series of Indexes Produced After Removing Some Sampling and Methodology Differences Between the Two Indexes. Available at http://www.fhfa.gov/Default.

aspx?Page=87.

Office of Management and Budget (OMB). 2009. “Update of Statistical Area Definitions and Guidance on Their Uses.” OMB Bulletin No. 10-02. Washington, DC: Office of Management and Budget.

Shiller, Robert J. 2008. “Long Term Perspectives on the Current Boom in Home Prices.” In The

Economists’ Voice, edited by Joseph E. Stiglitz, Aaron Edlin, and J. Bradford DeLong. New York:



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