If home price index falls, is it just noise?

Unlike the imaginary tree falling in the forest, a falling Case-Shiller index often makes enough noise to affect home buyer behavior. Should it?

An economist quoted in The Wall Street Journal suggests the Case-Shiller index may overstate the actual decline in home prices.

“The more foreclosures there are in the Case-Shiller index, the more it falls, and that has nothing to do with underlying prices in the market, period,” Christopher Thornberg, a housing economist at Beacon Economics in Los Angeles. “This so called decline we’re seeing is noise.”

Case and Shiller, it’s interesting to note, don’t agree on the future of home prices.

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