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The 2014 Case-Shiller Report: What Does It Actually Mean?

This week, S&P/Case-Shiller released its monthly housing data report, the leading measure of home prices across the nation. Immediately, reporters posted dozens of stories about January's numbers-with oddly contradictory headlines.

"US home prices rise in January: S&P/Case-Shiller", Reuters proclaimed. "Home prices decline for third month in January," the Wall Street Journal's MarketWatch blog wrote. "Case-Shiller sees housing market cooling ever so slightly," the Los Angeles Times proclaimed.

Which is it? Well, depending which numbers you look at, the answer is both-and all three. The S&P/Case-Shiller Home Price Indices track home prices across the nation, looking at the data a number of ways. Conflicting headlines come from whether the reporter is using non-seasonally adjusted numbers (the raw data from that month) or seasonally adjusted (with seasonal peaks and valleys smoothed out).

It turns out that in January, housing prices (not seasonally adjusted) across 20 major American metros collectively dipped by one tenth of 1% compared to the prior month. In both December and November, that was also true: home prices dipped by 0.1% compared to the prior months then as well. Time for mild anxiety.

But when that same data is looked at through a seasonally-adjusted lens (with seasonal peaks and valleys smoothed out), it turns out that prices in January actually increased 0.8% across the nation. Therefore, joyous headlines.

"In something like housing, the season makes a huge difference," David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices, explained to FORBES. Sales slow down in winter months and tend to deflate prices; Case-Shiller factors that in and adjusts its numbers to account for that predictable change and report more even monthly data. The difference in the smoothed-out (seasonally-adjusted) versus raw (not seasonally adjusted) data is also pretty significant for the kind of story a reporter might write.

Both measures have their advantages. The committee reported seasonally-adjusted numbers for years, Blitzer explained, but during the financial and foreclosure crisis switched to non-seasonally adjusted data because it better reflected the drama happening in the market. Today, with the housing market normalizing, the committee is considering going back to using seasonally-adjusted numbers, Blitzer noted. But looking at the numbers year-over-year really gives a better sense of the market's overall direction, Blitzer said.

On that note, year-over year prices (not seasonally adjusted) are also up significantly. In January, the 10-City index rose 13.5% year-over-year, while the 20-City index rose 13.2% (both indices track single-family homes). While the (seasonally adjusted) figures indicate that the housing market is continuing its overall recovery, January's (not seasonally adjusted) numbers compared to February's for the 20-City Composite show a bit of a winter chill on prices.

"The housing recovery may have taken a breather due to the cold weather," Blitzer said via a release.

Of those cities, Boston saw a 0.5% decrease.

"From the bottom in 2012, prices are up 23% and the housing market is showing signs of moving forward with more normal price increases," Blitzer said.

If we want to take a closer look, the seasonally-adjusted numbers show quite good news in terms of home price recovery. The 10-City and 20-City indices are both up 0.8%, and all cities posted seasonally-adjusted month-over-month gains: Atlanta (0.4%), Boston (0.2%), Charlotte (0.4%), Chicago (0.4%), Cleveland (0.8%), Dallas (0.6%), Denver (0.8%), Detroit (0.4%), Las Vegas (1.2%), Los Angeles (0.4%), Miami (1.2%), Minneapolis (1%), New York (0.8%), Phoenix (0.4%), Portland (1.1%), San Diego (1.8%), San Francisco (1.7%), Seattle (0.6%), Tampa (1%), Washington D.C. (1.3%).

"We remain far from normal in terms of appreciation rates, negative equity rates and mortgage rates, but we're getting there, and a slowdown in appreciation is welcome," said Zillow Z -2.95% Chief Economist Dr. Stan Humphries. "As the busy spring home shopping season ramps up, potential buyers and sellers each have some things to look forward to. Buyers can generally expect a lot less competition from investors armed with cash offers, and modestly more homes to choose from; while sellers can still enjoy market dynamics tilted more towards them than to buyers."

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