From HW:

The National Association of Realtors is in the midst of revising its core home price index. While the move may be a concern to some, fellow HPI service Zillow said it isn’t affected by the revisions.

“NAR’s rebenchmarking is not impacting Zillow at all,” said Zillow Chief Economist Stan Humphries. “We look at closed sales from public records. NAR is a survey. We’ve never used NAR’s numbers for our analytics.”

NAR is currently revising downward its index in what it labels a normal rebenchmarking process. Humphries said Zillow requires no such revisions and stands by his firm’s numbers.

The economist also denies the Zillow numbers, what it calls Zestimates, look at housing through rose-tinted glasses. Zillow calls May 2007 the peak of the housing boom. Since then prices collapsed 23.7%.

Other home price indices are more severe than Zillow’s. CoreLogic calls the peak in April 2006 and accounts for a 32% decline. Lender Processing Services calls the peak in June 2006, with a 30.2% decline.

(JtR’s prediction from September, 2006 here)

Zillow’s numbers follow 83 million homes in about 2,500 counties nationwide, Humphries said, but aren’t as harsh as other HPIs for one simple reason: they don’t include distressed properties.

“Case-Shiller and similar HPIs were originally designed as a way for banks to understand their portfolios better,” Humphries said. “The purpose of what Zillow does is to give consumers a better look at home prices and what’s happening in the nondistressed market. Including foreclosures gives a more pessimistic view than is warranted, assuming buyers or sellers are going to engage in conventional sales.”

Stephen Kim, a housing analyst at Barclays Capital, said he expects minimal market reaction to the NAR revisions.

“We have long suspected that the NAR’s data was severely flawed, particularly with regard to its handling of foreclosure sales,” he said, and even though the NAR revision “while jarring, is a backward-looking event, and has little bearing on prospects for future home sales.”

Kim said Barclays finds other economic indices more useful for the needs of his investment clients. Data on job growth, mortgage purchase applications, housing starts, consumer sentiment and homebuyer traffic point to improvements in housing more so than following national price levels.

“Our view that a housing recovery is likely to emerge in 2012 has never been predicated upon the level of existing home sales, but rather has focused on the growing divergence between distressed and nondistressed home prices, as reported by CoreLogic,” said Kim.

“We continue to believe the fact that nondistressed home prices have been flat to up all year is a precursor to improving home buying sentiment in 2012,” he added.