OFHEO vs. Case-Shiller, a primer

March 27, 2008

The big news over the past few days was the media frenzy reporting housing price declines nationally but confusing many is why the Case-Shiller index showed greater declines than the index from the Office of Federal Housing Oversight (OFHEO).

In a nutshell, OFHEO tracks sales and refinancing securitized by Fannie Mae and Freddie Mac while Case-Shiller tracks sales including jumbo loans and subprime loans but focuses on the largest housing markets in the country.

Case-Shiller and OFHEO index Because Case-Shiller focuses on the largest housing markets in the country and because many of those markets are showing the largest declines as they showed the largest appreciation in past years, the index is more volatile. Additionally, the luxury housing market has been weaker than the mid priced market due to a higher rate spread for non conforming loans.

As I’ve pointed out on a number of occasions, the Charleston real estate market has held up very well during the current housing correction. Having moved here from Charlotte NC a number of years ago, I find similarities between the two cities in good job growth and significant inward migration from other cities around the country. Charleston also benefits as a retirement destination. You’ll note that Charlotte is the best performing city measured by the Case-Shiller index and that can comparably describe housing market trends in the Charleston real estate market.

Click here for an excellent primer from the WSJ.

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