If it bleeds, it leads. That's been a newspaper reporting maxim for decades.

Right now, US real estate is bleeding, according to the widely reported S&P Case/Shiller Indices. That gets the co-creator of the indexes Robert Shiller a lot of attention.

The popular press loves this guy. He predicted that irrational exuberance would result in a stock market crash, which it did weeks after his book by the same name was published in 2000. So when he tells a star-struck Money reporter in April 2007 that home prices are as overvalued as stocks, the Wall Street Journal, Bloomberg and others made Shiller the new housing messiah.

Shiller's indexes are notoriously pessimistic. They use same sales on housing in 20 to 100 MSA's, not cities. It excludes condos and coops, which seriously skews the numbers in MSAs like New York City. So when Case-Shiller says home prices dropped 8.9 percent in 2007, the headlines ran red with blood.

Just to give you an idea of how much the Case-Shiller Indices differ from other traditional home sales compilations like OFHEO and the National Association of Realtors monthly indexes, consider this, says David M. Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City, "OFHEO has been keeping a national index for years and publishes monthly a one inch thick book on housing prices. It says that in 2007 the average price in America was down .3% . Yes, that is three tenths of one percent, not Mr. Shiller's 8.9%. Compared to OFHEO Mr Shiller's index overstates the decline by 29 times or 2900%, not a small amount. The National Association of Realtors index showed a median 1.4% decline nationally after 64 years of uninterrupted gains. Compared to NAR's 1.4% median price decline, Shiller overstates the "freefall" by 6.3 times or over 600%.

Michonski goes on to point out that the parent franchisor of Coldwell Banker, Realogy recently released its own findings for 2007 housing sales, a one percent loss, right in line with OFHEO and the NAR. By those numbers, Shiller overstated housing declines by nine times.

So why is Shiller so negative on housing? Not one of the so-called investigators of the press suspects that Shiller might have an agenda.

The Case/Shiller Index is licensed by Macromarkets LLC. In partnership with the Chicago Mercantile Exchange, Macromarkets created the "Housing and Futures Options" for trading.

The CME Group, a Chicago Board of Trade Company, describes trading housing futures as having multiple benefits to investors:

• A new means of risk transfer to a broad range of investors
• Low cost exposure to real estate values without direct ownership of properties
• Access to a unique asset class
• Opportunity to profit from a movement in housing prices
• A way to make trading in real estate a short-term and liquid investment

This is a hedge product, folks, and guess who one of the owners of Macromarkets LLC is? None other than Shiller.

"Every time a CME hedge is made, revenue flows to Macromarkets," says Lawrence Yun, senior economist for the National Association of Realtors. "People would hedge only if they believe prices will fall big time."

Yet, in perusing stories on the Internet where Shiller is quoted about the housing market, I've yet to see one reporter point out this compromising fact. Not Bloomberg. Not the Wall Street Journal. Not anyone.

In his book Irrational Exuberance, Shiller makes an interesting observation: "The ability to focus attention on important things is a defining characteristic of intelligence."

So let's focus on this: We all need housing. We all need to live somewhere. Whether housing prices go up or down, you're going to pay to live indoors. The question is: Do you want to pay a landlord or pay yourself? Somebody's going to get the equity; it might as well be you.

Published: April 2, 2008

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.