Two house price indices came out this week--the Case-Shiller and the OFHEO. Case-Shiller is down, while OFHEO is flat (quarter-to-quarter). It is natural enough to wonder why.
The two indices have three principal differences:
OFHEO has only houses financed with conforming mortgages (those with balances of less than $417,000). CS uses all sales.
OFHEO includes appraised values for refinance loans. CS looks only at sales.
OFHEO includes houses that may have been substantially improved from one sale to the next. CS throws those houses out.
In short, CS is better. The only advantage OFHEO has is that it covers the whole country--CS only covers the 20 largest metropolitan areas.
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