Case-Shiller: Prices in Boston Headed Back Down
While most of us were out enjoying the holiday break last week, the folks at S&P/Case-Shiller released the latest data for their home price indices, which provides the most accurate measure of single-family home price trends for twenty markets across the country. Since S&P’s coverage conveniently includes each of the eight markets that Redfin provides service in, let’s take a look at the home price data from the S&P/Case-Shiller Home Price Indices (HPI).
Before we get to the charts, let me give a brief explanation of what the Case-Shiller HPI is. To calculate the index, they look at repeat sales of single-family homes over an “arms-length” period of time. Home sales that include things like major remodels, property splits, and sales between family members are disregarded, and sale pairs are weighted based on the length of time between each sale. After all this, the current month’s data is used to calculate a three-month rolling average which is the reported HPI. Data is released on the last Tuesday of every month, for the period two months prior (i.e. – September data is released in November).
For a more detailed explanation of their full process, check out their methodology pdf.
Here are the basic Case-Shiller stats for the Boston area* as of September:
September 2008
Month to Month: Down 1.1%
Year to Year: Down 5.7%
Change from Peak: Down 11.8%
The following chart shows the Boston HPI scaled such that the September 2005 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Boston HPI was lower than it was in the latest data (February 2004).
Boston peaked earlier than any of the 20 markets tracked by Case-Shiller, and has also had one of the slowest declines, with prices falling just under 12% in the three years since the peak.
Home prices here have also not declined as steadily as they have in other markets, as there have been regular periods each year during the post-peak decline that prices have actually increased. With the latest data, it looks like the third such period is now over, and home prices are about to continue downward again, likely until Q2 next year at the earliest.
Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Boston’s performance to other areas across the country:
And here’s one more chart, in which I have lined up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.
The first year and a half of Boston’s home price declines looked very similar to home price drops in other markets, but in the following 18 months, prices have nearly leveled off in Boston while they continue to tank in other markets.
The bottom line for Boston seems to be that while the market here is definitely soft, home prices have not fallen nearly as much as they have in other parts of the country, so if you’re a buyer out there today don’t expect to have an offer for 25-50% off peak prices be seriously considered by a seller.
*[Case-Shiller defines Boston as the entire Boston-Cambridge-Quincy, MA-NH Metropolitan Statistical Area, which includes all or part of the following counties: Essex MA, Middlesex MA, Norfolk MA, Plymouth MA, Suffolk MA, Rockingham NH, and Strafford NH.]
