Watching the Big Picture With Indexes
Real estate investment by necessity focuses on very local markets. After all, most people agree that real estate truly is "location...location...location." There is no substitute for a thorough knowledge of the local market where you plan on investing. In fact, many successful real estate investors will only conduct business in the area in which they live. It's not a necessity, but it is certainly easier to keep up on the local factors that will influence real estate prices and rental income if you live in the area. Direct observation of what's happening is valuable.
Wherever you invest, whether you live there or not, local markets do correlate with regional and national real estate markets. A sharp investor will keep up with regional and national trends in order to develop a "big picture" view of the markets to complement their local focus. There are two major resources used by professionals in the equities and mortgage secondary markets. They each have their pros and cons, and it really isn't a bad idea to watch them all. You look at them and decide what works for you, as there are definite differences in their methods of data compilation and calculation.
S&P Case-Shiller Home Price Index - This is one of the oldest and most respected home price indexes out there. It is now owned and operated by the Standard & Poors people, and you can access its various reports at this link:
It is the most optimistic and pessimistic of the indexes. In other words, when things look bad, they look really bad on this index. This is due to their methods of data compilation and the resources used for the data. There is a definite difference when it comes to the next index and their methods.
OFHEO (Office of Federal Housing Enterprise Oversight) Home Price Index - Using different sources for data, and compiling data from more rural areas and many more regions than Case-Shiller, many believe this is a more accurate barometer of national and regional home price trends. It usually looks not quite as good in good times, and definitely better in bad times than does Case-Shiller. Here's the link to their site and reports:
With more regions, you can do a better job of closing in on your area with the OFHEO Indexes than with Case-Shiller.