Humphries asserted that the home price indices of Standard and Poor's and Case-Shiller for major U.S. cities may have overestimated declines in home prices because the indices did not consider the impact of sales of foreclosure properties, which accounted for most of houses sold in large cities like San Francisco and Los Angeles. In zillow.com's press release, the firm said foreclosure properties have been making the housing market look much worse than it actually is.



Based on zillow.com's findings, the median home sale price for foreclosure properties in the Los Angeles area was 59 percent of non-foreclosed homes; while in the San Francisco area, the median home sale price for foreclosure properties was 47 percent of the median price for non-foreclosed properties.

With this figures, Humphries contended that the prices of foreclosure properties are declining faster than the prices of non-foreclosed homes and that foreclosure prices are decreasing faster than the home price indices He however admitted that his figures are not enough to say that Case-Shiller's overall housing market indices are inaccurate.

Humphries also understands the contention that the falling values of foreclosure properties show a more accurate picture of the housing market than the higher values of non-foreclosed properties. More foreclosure properties than non-foreclosed properties are being sold because they are being priced correctly according to market movements. Banks are selling them at lower prices because the foreclosure properties are damaged and the banks need to remove them from their records.

Meanwhile, non-foreclosed properties are being sold at higher prices because the owners typically are able to wait till the housing market supports higher prices.

However, some housing analysts say these owners might have to wait for a longer time since state foreclosures continue to rise and foreclosure properties continue to flood the market and the elimination of foreclosure properties from the market does not automatically mean a rise in prices for non-foreclosure properties. Housing analysts have also observed that buyers looking for non-foreclosed properties are delaying their purchase decisions.