Case-Shiller is generally preferable to median prices in tracking housing valuations because the methodology uses only repeat sales.  This restrictive algorithm includes only existing, single-family houses which have sold previously.  The intent is "to capture the true appreciated value of constant-quality homes."

Median values may be skewed for a variety of reasons.  Newly constructed homes, which differs qualitatively from the existing housing stock, may sell at a premium or discount based on differing features.  Homebuilders are disproportionately effected by housing market trends, and new inventory prices are more volatile as a result.  The median may also be influenced by peculiarities in the mortgage market, such as Fannie/Freddie policies which presently subsidize low-end transactions.

Median index values captured by sources like Zillow are useful though.  The indexes include more transactions over a broader geography, making them better evaluators of the national housing market.  Median values are less volatile and capture components of the market consciously ignored by the repeat sales method.


 


Zillow data since the implementation of Stimulus Spending is interesting compared to Case-Shiller.  During the attempt to prop up housing the median downward slope changed markedly, but prices never appreciated.  

This pattern may be interpreted as a continued erosion of national housing value, despite programs which benefited existing home sales in larger markets.  Median prices may have continued to drift lower, though, because the tax credit prompted more sales activity at the bottom of the market than at the top; which makes intuitive sense.

Either way, the next several months of housing price data will be illuminating.  While the Case-Shiller May data is tainted by lingering tax credit transactions, it will provide insight into how abysmally the Government's 18-month, strategic response to the housing crisis has failed.