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Case-Shiller Echoes Auction Index

By Steve Cook, Real Estate Economy Watch   |   March 28, 2012 at 11:43 AM   |   Comments

No need to worry long about yesterday's depressing Case-Shiller numbers. In a two to three months, count on C-S to be on the way up again.

That's because the WMM Auction Index, a monthly measure of prices from auctions conducted in 20 metro markets by the leading auction house Williams, Williams & McKissick, has consistently foretold market shifts in the S&P Case/Shiller 20 market composite since it was launched in 2007.

Case-Shiller's January numbers were dramatically down yesterday, falling to levels 3.9 percent and 3.8 percent below those of year ago and 0.8 percent in the month of January. Last October, however, the auction index started to rise and in January the WWM Auction Index was up 1.7 percent above December.

"We lead Case-Shiller by about 90 days because of the speed with which auctions take place," said Fontana Fitzwilson, the company's SVP of Business Intelligence and Analytics. She's right. An analysis of the index of auction transactions—the company averages 10 to 15,000 transactions a month—shows Case-Shiller uncannily shadowing WMM's price swings by 60 to 90 days.

The 2009 tax credit price boost, for example showed up in March in the WMM Index but Case-Shiller didn't see it until July. The price crash that followed the end of the credit bottomed in December 2009 on the WMM Index but Case-Shiller didn't bottom until February 2010. The double dip in prices recorded by Case-Shiller in the fourth quarter of 2010 and early 2011 showed up in the WWM Index the previous July.

Homes to be included in an auction are marketed 30 days in advance of the auction, giving prospective buyers time to check them out. After the auction, they close in 30 days. Average time in inventory for a Realtor.com listing, by contrast, is currently 111 days and closing time can take 3 months or more. Case-Shiller relies on public records for its data, which can take even longer to be posted.

"S&P Case-Shiller and WWM Auction Indices have displayed consistent market fluctuations. Despite these consistencies, a critical difference is the Auction Index provides more real-time data, as the index tracks timely and consistently with S&P 500 trading performance. Therefore, if previous correlations between the indices continue as expected, similar Auction Index trends are expected to appear in the Case-Shiller index in the coming months," states the company's Web site. The WMM Auction Index is released on the tenth of every month.

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