Trulia Announces New Listing Price Index. But Is It Any Good?

Today Trulia announced the Trulia Price Monitor, which measures changes in listing prices of homes within their coverage areas. What’s interesting about this index is that reflects what’s happening now, as opposed to Case-Shiller and other indexes which measure sold prices of homes that actually went “pending” several months earlier.

In short, this index can give us an early hint at how home prices are changing.

The downside of course is that Trulia’s data is far from perfect. And it’s too soon to tell if their seasonal adjustments and adjustments for the “mix” of homes for sale will produce worthwhile results.

From Trulia:

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.

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, areNOT 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.

Here’s their explanation of their “hedonic” method (how their sausage is made):

We run hedonic regressions of log-prices on property-level attributes, ZIP-code-level attributes and month dummies. We run separate regressions on for-sale and rental properties in each metropolitan area. The month-dummy coefficients are the basis for the Trulia Price Monitor and the Trulia Rent Monitor. The metro-level regressions are unweighted (unlike the Case-Shiller index, for example, which weights sales pairs by initial value). The national-level series is a weighted average of the metro series, weighted by the number of non-vacant owner-occupied or rental units (for the Price and Rent Monitors, respectively) according to the 2010 Census. We seasonally adjust the Trulia Price Monitor with the Census X-12 ARIMA software using five years of historical data, with separate seasonal adjustments for the national and each metro series.

List Prices Are Slowly Rising

So what does the listing data show? That, on a seasonally-adjusted basis, list prices are rising so far this Spring.

 Trulia Announces New Listing Price Index. But Is It Any Good?

And Trulia notes:

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

Breaking Down California Metropolitan Areas

Trulia shares the Metro areas with the biggest price increases and biggest price declines. The only Northern California Cities to make the lists were Sacramento and Fresno, both among the worst performing cities. I’d be curios to know from any agents in these towns if this data passes the “sniff test.”

 Trulia Announces New Listing Price Index. But Is It Any Good?

San Francisco registered an annual (March-t0-March) listing price drop of 2.9% and a quarterly (March-to-December) increase of just 0.1%. Oakland registered an annual drop of 5.8% and a quarterly drop of 0.9%. San Jose fell 2.0% annually and rose 0.9% over the last quarter. Click HERE for the complete list of cities.

Initial Impressions

I like what Trulia is attempting to do, which is tell us if the market is getting stronger or weaker right now. But because Bay Area neighborhoods are so diverse, with ultra-high end homes all the way down to crumbling shacks, short sales, and foreclosures, and because the samples are so large, I’m not convinced that any Buyer or Seller can see the index rising and believe that the real-time value of their home is going up accordingly.

Understanding the real-time momentum in a specific neighborhood and price range is the holy grail of housing data. Trulia’s new model is a step in the right direction, but doesn’t seem like anything that would help Buyers or Sellers in the trenches.

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About Greg Fielding

I am a longtime real estate agent who has pretty much seen it all during the housing boom as bust. With experience in selling high-end property and low-end foreclosures, raw land, short sales, development work, apartment buildings, and working with investors, I bring a well-rounded perspective to my work.I also have started to do some paid real estate consulting. If you have questions or just need some good real estate advice, book an appointment at http://whattodorealestate.com/In addition to selling real estate, my insights have been featured in The New York Times, The Big Picture, and regularly on Patrick.net. I have also done consulting work with ForeclosureRadar.Starting my career, in 2003, I have sold homes throughout Alameda and Contra Costa counties, specializing in Danville, Alamo, Blackhawk, San Ramon, Dublin, Pleasanton, Walnut Creek, Lafayette, and Orinda. I live in Danville with my three kids.


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3 thoughts on “Trulia Announces New Listing Price Index. But Is It Any Good?

  1. mikewilliamsenmikewilliamsen

    I have no faith in the 3rd party real estate web-based companies such as Zillow, Trulia, Realtor.com, etc. They cause more damage than help. Lenders were using Zillow instead of bona-fida appraisals in the past decade. The irony is that we agents pay for our MLS systems, provide the data, held accountable for accuracy. I get calls off of Trulia, Zillow, Realtor.com postings from over a year ago. I get calls from clients claiming the house down the street just sold on Trulia for $50k. I had to explain that this was just the second mortgage.

    There is no substitution than for a boots-on-the-ground, local expert — like we all should be.

    None seem to take into account, in Marin for example, all the low end properties were the first to sell and have been gobbled up by investors, and now the high end houses are going through foreclosures and short sales. Obviously average prices will go up. How is that for a “hedonic regressions of log-prices on property-level attributes.”

  2. Tom Stone

    Trulia has partnered with Better Homes and Gardens Mason McDuffie of which I am a part. Be still, my heart! I did get 3 free pens and expect that to be the only benefit. And actually, the lenders had and have their own proprietary AVM’s, when properly used in a reasonably normal market they can be useful to risk management in flagging potential fraud. Not in this market…

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