Jed Kolko, Trulia Chief Economist

Trulia‘s Chief Economist introduces the Trulia Price Monitor and the Trulia Rent Monitor — the earliest indicators of how asking home prices and rents are trending in today’s market.

I rely on the major sales-price indexes – Case-Shiller, Federal Housing Finance Agency (FHFA) and CoreLogic – as much as the next guy (or the next housing economist, anyway). They’re essential for understanding where home prices have been going. But they come out between five and eight weeks after each month ends, and the sales prices they report are rooted in asking prices set two or three months earlier. Doing these sales-price indexes right takes time – but buyers, sellers, investors and policymakers need to know what’s happening in the housing market now.

Starting today, we’re closing this gap. The Trulia Price Monitor and the Trulia Rent Monitor show every month what’s happening to asking prices and rents almost in real-time. By focusing on asking prices and releasing each month’s Monitors just days after each month ends, we can detect price movements at least three months before the major sales-price indexes do.

What are the Trulia Price Monitor and Trulia Rent Monitor?
To create the Trulia Price Monitor and Trulia Rent Monitor, we take all the for-sale homes and rentals ever listed on Trulia.com and calculate how asking prices and rents changed month by month. Rather than simply tracking the average or median, we adjust for the changing composition of homes that are listed each month. Therefore, these Monitors reflect the price and rent trends for similar homes in similar neighborhoods over time. For the Trulia Price Monitor, we also account for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices.

The Trulia Price Monitor differs from the major sales-price indexes in important ways.

First, we focus on asking prices. Final asking prices lead sales prices by about two or three months, reflecting the time that homes are typically on the market. In 2011, the Trulia Price Monitor’s national month-on-month changes track the seasonally-adjusted month-on-month changes in Case-Shiller and FHFA two months later.  Asking prices, however, are NOT a perfect predictor of sales prices: the final sales price for a home can be above or below asking, and some listed homes might not sell. Asking prices and sales prices each have their advantages for understanding the housing market: asking prices have the advantage of showing current market conditions and trends, but sales prices are the best guide to historical and long-term trends in the housing market.

Second, the Trulia Price Monitor uses a different statistical approach: a “hedonic” rather than “repeat-sales” method. The explanation gets technical pretty quickly, but we’ve provided all the details in our FAQs.

Here’s what to expect from us: in the first few days of each month, we will publish price and rent trends for the previous month, for the nation as a whole and for the largest metro areas (for prices, the 100 largest; for rents, most of the 100 largest). We report monthly, quarterly and yearly changes nationally, plus quarterly and yearly changes at the metro-level. Our approach lets us dig deep: in the future, we’ll look at price trends for single-family homes versus condos; homes with one, two and three or more bedrooms; downtown versus suburban trends; and more. Have some other comparison that you’d like us to make? Email us and let us know.

Madness! Asking Home Prices Moved Up in March
Let’s get to the facts. Nationally, asking prices on for-sale homes were 1.4% higher in March than one quarter ago. Prices increased month over month by 0.9% in March and 0.6% in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2% in a month. Asking prices in March were 0.7% below their level one year earlier.

One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps. Without adjusting for seasonality, asking prices rose 2.4% quarter over quarter.

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