Case-Shiller: Summer Price Plateau is Over

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 Chicago area* as of September:

September 2008
Month to Month: Down 1.1%
Year to Year: Down 10.1%
Change from Peak: Down 12.3%

The following chart shows the Chicago HPI scaled such that the September 2006 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Chicago HPI was at or lower than it was in the latest data (November 2004).

Chicago peaked at around the same time as most other Case-Shiller-tracked cities, and has declined noticably less than average, with the latest data showing prices off twelve percent from the peak (compared to the 20-city index, which has dropped nearly 22% from the peak).

Home prices declined sharply here late last year through March this year, then seemed to reach something of a plateau for the spring and summer. However, price drops are beginning to accelerate again with the September data, marking the largest month-to-month drop since March.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Chicago’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.

After exactly two years of home price declines, Chicago prices have held up better than all other Redfin-serviced cities except for Boston.

I would say that the bottom line for Chicago is that while home prices are in a definite downward trend, the declines have not been as extreme as other markets to date. That could change in the future, but so far Chicago home prices have been holding up relatively well under pressure.

*[Case-Shiller defines Chicago as the entire Chicago-Naperville-Joliet, IL Metropolitan Division, which includes all of the following counties: Cook IL, DeKalb IL, Du Page IL, Grundy IL, Kane IL, Kendal IL, McHenry IL, and Will IL.]