That Was a Doozy!

Last Friday, when we noted that many home-buyers were suddenly getting off the dime, brokers from all over the country chimed in with similar observations. Now perhaps we know why. The Case-Shiller data for August 2008 was published this morning, showing the biggest one-month drop in the 20-city composite index since its inception in 2000.

The data substantiate what I had noticed this weekend just browsing listings in the Berkeley Hills, where an old listing alert showed homes now struggling to sell for a price they had commanded in 2002 or 2003:

August 2008 Case Shiller Data Graph

The Case-Shiller data is considered more reliable than data from the National Association of Realtors because it excludes the distorting effects of remodeling and new construction, considering only sales on properties that sold before in essentially the same condition.

The price declines have been steepest in already-hard-hit San Diego, LA, San Francisco and DC, while Boston barely declined at all. While Case-Shiller has a nearly two-month measurement lag, our sense is that the trend continued in September and October, with inventory already on the market slashing prices.

Who knows where the bottom is, but especially in Southern California, DC and Seattle, we are seeing value-shoppers crawling out of their bunkers and snorfling around at the inventory. As noted by James Surowiecki at the New Yorker, the National Association of Realtors estimated that existing home sales jumped 5.5% in September, and now the Census Bureau reports that new home sales increased 2.7% in September.


  • Wendy in Seattle

    No wonder! I have a condo listed with Redfin and I’ve definitely noticed an uptick in showings over the past 2 weeks. I’ve been on the market for 5 months, and in the past I’d averaged 1 showing every 2 weeks. Now I’m having 2-3 per week!

  • Lenore Wilkas

    I find the Case-Shiller report to distort what is happening in the San Francisco market. The east bay area and counties adjacent to it, are in the tank but the west bay area is not. Yes, we have had a decline but not a dramatic one and part of the reason for a decline in sales has been the difficulty of well qualified buyers in obtaining loans. Until the banks trust one another and open up the lending market, we will not improve in sales. Prices have remained rather flat in our area, the San Francisco Peninsula.

  • Glenn Kelman

    Lenore, I couldn’t agree more about the disparity that has existed over the past year between the East Bay and San Francisco/Peninsula, but it seems to be narrowing somewhat, and I don’t think problems in demand are entirely due to buyers’ being unable to obtain loans; at least, this hasn’t been an issue recently for our buyers. Just my take, though you might know more…

  • John Paul Murphy

    I have extensively studied the Case-Shiller index’s methodology, and that too many people are focusing on it as if it were a crystal ball about to reveal something magical. When looking at the new monthly Case-Shiller data one thing to remember is that the lag time for receiving and evaluating new home sales data in accordance with the Case-Schiller methodology makes month to month evaluations worthless… There are plenty of other aspects of the methodology that make it a questionable tool, if your interested please follow this link:

  • Allan

    Any clue how the housing downturn has hit Silicon Valley? What about real estate closest to the big tech employers like Google and Apple? I’m hoping Case-Shiller does not include the Silicon Valley with San Francisco data.

  • Glenn Kelman

    The problem with Case-Shiller data Allan is that the pairs of home-sales it can consider are so sparse that it necessarily spans multiple sub-markets, like Silicon Valley, San Francisco and the East Bay… we’ll look for other numbers to help answer your question. Check back soon…

  • http://www.BeautifulMountainBlog.Org Drew Morgan

    The Case-Shiller methodology is fine for looking at macro trends in large market areas but it’s important to remember this tool was never designed for month-over-month analysis of individual neighborhoods.

    These are a few of the problems in using this methodology if you are trying to decide how to price your home or when to buy:

    • It uses a three month moving average which tends to even out important monthly trends. In a volatile market, this can be crucial information.
    • It throws the baby out with the bathwater–if a sales pair shows too much gain it is discarded and assumed to have been extensively remodeled.
    • It can’t effectively analyze small niche markets since it requires large data samples to drive the algorithms.

    If you want to analyze real estate holdings in the US over a ten year period—this is your baby.

  • Jonathan Blackwell

    That is some interesting data. Not included up above was Atlanta:

    “House prices in metro Atlanta were down 8.5 percent from August 2007 to August 2008, according to the Standard & Poor’s/Case-Shiller home price index.

    The report, published Oct. 28, shows Atlanta home prices went down 0.2 percent from July to August, following a 0.3 percent rise from June to July.”

    My personal website traffic dropped the most in early October around the time of the bailout and has picked up slightly recently. It will be interesting to see those numbers when they come out.

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