Often times I've seen the Case-Shiller index quoted as an unbiased benchmark regarding the housing market in the US. I read an interesting article written by Blanche Evans, editor of Realty Times, questioning whether the index is truly unbiased. I don't abdicate that the housing market isn't in decline, I am merely adding this info as a balance to the claims that only NAR is biased.
There is a large discrepancy between the Office of Federal Housing Enterprise Oversight, NAR and Case-Shiller percentage declines - the article raises some very interesting questions.
Robert Shiller a Yale economist and Karl Case a professor of economics at Wellesley are the co-creators of the index. It was launched to provide information originally to hedge funds but has now become the defacto index used by many investors and analysts as the "best gage" for real estate values.
What Blanche writes is interesting - the index is licensed exclusively to Macromarkets LLC for "developing, structuring and trading financial instruments". This is very interesting - Macromarkets' products is the Housing Futures and Options index. According to Blanche's article, this index forms the basis for "directly investing in and hedging US housing on the Chicago Mercantile Exchange, where futures and options on the index are traded.
According to Lawrence Yun, NAR's chief economist., when a CME hedge is made, revenues flow to Macromarkets LLC - people hedge when prices are viewed to be volatile.
The icing on the cake - Shiller is founder and chief economist of Macromarkets LLC.
Could it be construed as a conflict of interest? OFHEO and NAR do not have relationships with hedge funds.
Wednesday, June 11, 2008
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