Case-Shiller: LA Home Prices Still Moving Slowly Toward Stabilization

by Tim Ellis | 11 Comments

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. – February data is released in April).

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

February 2009
Month to Month: Down 2.0%
Year to Year: Down 24.1%
Change from Peak: Down 40.4% in 29 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 (August 2003).

la-case-shiller-peak_2009-02

The rate of decline in Los Angeles continued the moderating trend that began with November’s data. Both Los Angeles and San Diego climbed back up from 26-27% yearly declines to “just” 23-24% declines, as can be seen here:

socal-case-shiller-yoy_2009-02

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_2009-02

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_2009-02

Home prices have fallen faster since the peak in Los Angeles than every Case-Shiller market but Las Vegas and Phoenix, but it would appear that November’s data may have indeed been the first sign of an eventual stabilization. However, even if that is the case, the current rate of improvement would put home prices flattening out sometime in early 2011.

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  • Jc

    Seems to be (as always) the prices in Orange County are taking a slower pace down, And that because Local Realtors/newspapers(OCRegister) are the supporters of dragging their feet, with gimmicks/lies/neglecting the truth.
    The realtors sink lower than cars-selmans.
    And the sellers still in denial, waiting for a sucker tu purchase their second loans.

  • John K.

    In a declining market, he who sells first wins. Those who hold out for top dollars will eventually capitulate at much lower prices.

  • Diaphne Down

    LA’s West side had 2719 Notices of Default last week (April 27-May 1, 2009) and 2670 the week before that. We are nowhere near the bottom of this market–despite what the real estate industry would have us believe. Hang tough in your negotiations, buyers–or wait.

  • T. Kowalski

    Is no one cognizant of the fact that some homeowners are not trying to “get over,” but that they bought homes to live in, raise families in, etc.? Some of us moving aren’t in default, delusional or greedy, but looking to accommodate our family’s expansion or change in housing needs? I don’t understand the narrow and negative viewpoint of sellers espoused in these forums. Additionally, not all realtors are “used car” sales people. As is the case in all client/agent relationships, they are contracted to perform…aka sell the property. It’s just fatiguing to hear the same distorted generalities/stereotypes spouted. It allows everyone to distance themselves from the complexities of this current housing/financial situation. Finally, buying a property in default is not always the bargain some purport. Properties in short sale and REO status likely have grossly deferred maintenance, permit problems and suffer from general negligence. An individual on the verge of losing their home or bankruptcy isn’t likely to maintain their home property vs. the owner selling by choice.

  • R. Rubio

    Waaaahhhhhh….Waaaahhhhh…..You don’t like the “narrow and negative viewpoint” of many of us on these blogs? Too bad. If you were like many of “us” who did the prudent thing, and didn’t purchase homes with no money down/interest only/arms, and waited out the greed and hysteria promoted realtors, and television shows like “flip that house” – then you might understand why there is still a significant amount of pent-up disgust with the socal housing market.

    Prices may have come down 40% + since 2003, but there is still a significant way to go to reach the year 2000 levels which is when this bubble began inflating. The sales increases that we have been seeing are primarily foreclosed homes or short sales, and the only other significant area of improving home sales is FHS loans – which again return to the bad idea of allowing people to purchase homes with less than 20% down, i.e. 3-5% down. Why? Because prices are still too high in socal. If you actually have to live and work in LA County, and don’t live in the hinterlands of San Bernadino, simple track homes are still listed in the 500,000-600,000 range. 20% of $500,000 is $100,000! Nobody has that kind of cash to put down on a starter home, and this is still the closest thing to the Great Depression that we have seen in our lifetimes.

    Homes prices will continue to decline until we come back to some sort of real relationship between incomes and mortgages. California homeowners are still living in fantasy land.

  • T. Kowalski

    What’s with all the brouhaha? We purchased a home on the Westside of LA with 20% down on a 30yr fixed, didn’t overpay and are fortunate not to be losing our home. Absolutely, some of “us” sat down and ran the numbers, lived within their means and maintained a measured sense of reality. My point is that it’s erroneous to presume that every situation falls into the narrow categorization voiced here, ie.: greedy idiots getting their just desserts. Some home sales are a response to changes in housing requirements. Further, as evidenced by the slower pricing declines in certain areas, the deflation buyers are hoping for in the more desirable locations simply may not happen. Prices may continue to drop or stabilize, but only those under duress will sell at a rock-bottom price. Properties relinquished in such situations are not necessarily the best purchases as outlined in my previous post. The “us vs. them” mentality is simplistic and misleading.

  • D. Phan

    Other than,
    (1) Shady behind the door deals from realtors representing desireable property
    (2) Bank manipulation of shadow inventory
    (3) Foolish Government Intervention
    The natural correction process is still moving forward (slowly, but surely).

    Be patient, don’t get caught up in the bidding wars and purchase what you can afford. Simple as that.

  • Lissa

    I just had an escrow fall through because the seller and agent were greedy and delusional! Beng a first time home buyer, I got suckered. I found a home I loved and my husband knew the seller’s agent from 20 years ago who led us to believe that if we used him AS WELL, wew would get the best deal. Yeah, right!! House was listed at $623k in Sept., house was down to $599k in Feb. I did some comps myself and found another one (same in PUD) sold in Nov. 08 for $521k. Agent told us it was a “distressed sale” and to discount it. We offered $560K, but agent kept crying poverty for the seller who was going through divorce! We eventually upped offer to $575k when agent told us to “hurry up” and make another offer bc there was another buyer (Korean) who was offering $580K. Well, we offered the $575k and it was accepted. We started the whole escrow process and GUESS WHAT?!! The appraisal came in at $540k!!! We offered a good faith counter of $547K (which would have been the extra amount we would not have had to put down at 20%). Agent came back later and told us seller would not sell for that amount. And now I see home reselling for $599k!! Obviously, this AGENT was not working for us, but for himself and the seller. First of all, it’s the AGENT’s fault for letting the seller think his home was worth $599k, hence why he could not possibly sell it for $7k more than the appraisal price! The problem is, these sellers see that their neighbors sold their homes a couple of years ago for way more and that is how much they EXPECT to get in this market! Not gonna happen. We could’nt afford to come up with another $28k down on top of the $115k we were already going to put down. Plus we probably had to put another $20k into the house (new floors/window treatments/paint) before we could even move in! Why the heck would ANYONE want to buy a house for $35k more than the appraisal price? Someone please tell me how this house is going to sell for that amount??!!

  • SunnyC

    R. Rubio – I couldn’t have said it better myself….the housing market slump of the 90′s started recovering in 1997. By 2000, home prices were where they should be. With normal appreciation, current prices should be about where they were around 2001. Houses in SoCal are way above that!
    And yes, the realtors & bankers were presuring people like crazy – calling them constantly, trying to convince them they could afford the home they looked at.
    And the government sat by and let it all happen.
    People in the housing industry made money hand over fist, for a decade. If anyone bails out these foolish homeowners, it should be them.

  • JK

    T Kowalski,
    Nothing wrong with you trying to sell your house. The key is as long as you price it reasonable for the current market. If you have equity then good for you. If you don’t then I think people on these forums will tempt to clump you with the greedy sellers trying to find a knife catcher.
    If you can sell I’d think of renting for a while after that. I understand about an expanding family as I am in a similar situation. But to buy a place now that might be 50k less in a year or so would be throwing good money away. That 50k will go a long ways for one of my childrens education.
    I don’t think people on these forums are attacking you personally but in general there are way too many delusional sellers still out there. Then there are those that price accordingly to today’s market. Those are the ones that are selling!