by Calculated Risk on 4/29/2008 01:18:00 PM

This graph shows the year-over-year price changes for the Case-Shiller composite 10 and 20 indices (through February), and the Case-Shiller and OFHEO National price indices (through Q4 2007). The current recession is probable, and hasn't been declared yet by NBER.

Click on graph for larger image.

The composite 10 index (10 large cities) is off 13.6% YoY. (15.8% from peak)

The composite 20 index is off 12.7% YoY. (14.8% from peak)

The Case-Shiller national index will probably be off close to 12% YoY (will be released in earlylate May). Currently (as of Q4) the national index is off 10.1% from the peak.

The OFHEO index is barely negative YoY as of Q4 2007, and prices are only off 1.6% from the peak.

We've discussed before the differences between Case-Shiller and OFHEO. Another important point is that the Fed uses the OFHEO series to calculate changes in household real estate worth in the Flow of Funds report. To the extent the OFHEO index missed the runup in prices in recent years, the Fed underestimated the increase in household wealth - and therefore probably underestimated the wealth effect on consumers.

Now that prices are falling, if Case-Shiller is a more accurate reflection of actual prices than OFHEO (as I believe), then the Fed might be underestimating the drag on consumer spending from falling prices.