As many of you know..I like Lou Barnes because he sees all sides of the picture¦ in a recent article he takes on both the bulls and the bears and shares his views about what is happening in the market. Most noteworthy is his take on Case-Shiller. The Case-Shiller Index has taken on a life of its own.. not for what it actually is but rather for what many people think it is. The fact that it is now called the S&P Case-Shiller Home Price Indices makes it more authorative for many consumers. Case-Shiller provides useful information about market trends using certain types of homes. Most people dont understand just what Case-Shiller actually tracks.. it tracks homes sales of the same home over time.. not the same address but the same home.

Case-Shiller uses a rather limited base for the index. Case-Shiller doesnt track new construction or townhomes/condos. Whoops.. thats a lot of our market¦ Nor does it track homes that sell to developers that are torn down and two townhomes built. That is a big part of the housing market in Redondo and the sand sections of Manhattan and Hermosa. It cant track a duplex in the sand section that was torn down and replaced with a single family home as it doesnt track residential income properties or new construction. The truth is that Case-Shiller doesnt track most of the housing that makes up our South Bay-Beach Cities real estate market. Depending on Case-Shiller in our little slice of heaven is probably not the best resource for a potential buyer. Case-Shiller tracks home sales in 20 Metro areas.

In our metro area the index tracks homes in the City of Los Angeles, Long Beach and Santa Ana. These areas have little in common with Manhattan Beach, Hermosa Beach, Redondo Beach and El Segundo. Long Beach has seen their entire market fall apart with large numbers of short sales and foreclosures¦ while the Beach Cities have not had a lot of foreclosures or even short sales when compared to other areas used by the index. Los Angeles is so large and has so many diverse areas in a state of flux that tracking same home sales is no easy matter. Santa Ana is just simply a different world. Yet if the Case-Shiller report says home prices will drop 30% in this metro area consumers automatically believe this will happen to home prices in Manhattan, Hermosa or Redondo.

The problem is that we really don’t conform to the guidelines of the index. Anyone who has been in the Beach Cities for 5 years or more knows the supply of homes continues to change making it harder and harder to find same home sales over a period of time. Small homes are torn down and replaced with large homes. We add on and up and reconfigure interiors with gourmet kitchens, baths and any other item we can think of to improve the home. We are the remodeling magazines dream locality. Much of the value in our area is based on location, lot size and view not on the actual physical structure. None of these categories plays a part in the index.

Trying to use Case-Shiller as the ultimate measure of value and pricing trends in the Beach Cities makes little sense. Case-Shiller is good for what it is.. and that is one of the tools a buyer or seller can use to help establish trends. But if you are depending on it to give you an accurate measure of value in Manhattan Beach and the Beach Cities you are going to be disappointed. Buyers and Sellers need to know what is happening overall in their local real estate markets. Buyers and Sellers need to be aware of the difference in pricing that can happen if you are on the north side compared to the south side of the street or the east side compared to the west side. Most of us know you cant compare home prices in Manhattan Beach with home prices in South Redondo. Physically they may be close but price wise they are very far apart. National trends are interesting but knowing what is happening in your local market is the best gage of value whether you are buying or selling.