Case-Shiller: Los Angeles Home Price Drops Slow 2 Months in a Row

It’s time once again for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI).

For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – December data is released in February).

Here are the basic Case-Shiller stats for the Los Angeles area (which Case-Shiller defines as LA and Orange Counties) as of December:

December 2008
Month to Month: Down 2.5%
Year to Year: Down 26.4%
Change from Peak: Down 37.4% in 27 months

Last month I questioned whether a slight slowdown in the rate of year-to-year price drops may be the first sign that home prices are on their way to stabilizing in Los Angeles. Of course, a single month of data is not enough to come to any real conclusions, but it was interesting, nonetheless.

This month, the year-to-year data in Los Angeles and San Diego ticked up again. Here’s a chart to demonstrate what I’m talking about:

socal-case-shiller-yoy_2008-12.png

Now, I’m not saying that two months of data is enough to proclaim the imminent demise of the housing bust, but it does at least show us that November’s data was not merely a one-month anomaly. This is definitely something we will be keeping our eyes on in the coming months.

The following chart shows the Los Angeles 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 Los Angeles HPI was at or lower than it was in the latest data (November 2003).

la-case-shiller-peak_2008-12.png

According to the Case-Shiller index, as of December home prices in Los Angeles have “rewound” over five years.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare Los Angeles’s performance to other areas across the country:

case-shiller-redfin-markets_2008-12.png

And here’s our final chart, in which we line 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.

case-shiller-peak-declines_2008-12.png

While home prices in other cities have been declining longer, not many have declined further than Los Angeles. So it would make sense for Los Angeles to be one of the first to find the actual bottom. I still thing we’ve got a ways to go yet, but if the pattern of moderating year-to-year declines continues, we may at least know where to look.

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  • TrabucoDom

    The CA moratorium on foreclosures probably influenced the 2-month uptick you refer to. This should correct after the foreclosures resume, I would guess.

  • JP

    We are nowhere near the bottom yet. The fundamentals have significantly eroded in the economy and in Los Angeles. While many are seeing 2003 prices return, prospective buyers should expect closer to 1997 home prices.

    Buyers need to be patient. Avoid being a “knife catcher” and buying a property that just loses your hard earned money. The goal of real estate debt is to build equity, not lose it!

  • Elizabeth

    Easy there tiger. We’re just entering the long slow grind down of another 30-40% over the upcoming 4-5 years after the initial cliff diving phase. That’s if we’re lucky and this cycle isn’t any different to the last few.

  • Hannah B.

    Well, if you listen to Robert Shiller in interviews, he thinks we’re only half way down. Granted he’s speaking nationwide, but that bodes even worse for bubble markets like California. Housing prices here are even further out of line from median incomes and we just have that much more to fall than others. The slowing in price drops may not be a good thing. It sounds to me like in for a longer economic contraction. Personally, I prefer just to rip the band-aid off.

  • http://www.thejills.com Miami Beach Homes

    It seems that every for every uptick there’s also a plunge. Perhaps prices are on a stabilization path, albeit a very slow and rocky one.

  • HomeBuyer1354

    The sky is falling! The sky is falling! Really – Even if it looks like it stopped? The last big Orange County down to up cycle was 91-94 – the bottom was 15% from the top based upon averages fro the National Association of Realtors. We are now down 30% and median incomes are up and mortgage rates are 3 points lower than 1994. So affordability is way UP. Another 30% drop does not seem feasible but I guess we all make our guesses and place our bets. I think IF you can qualify for a loan there are some huge bargains out there.

  • http://www.edhardyworld.co.uk ed hardy

    Easy there tiger. We’re just entering the long slow grind down of another 30-40% over the upcoming 4-5 years after the initial cliff diving phase. That’s if we’re lucky and this cycle isn’t any different to the last few.

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