Case-Shiller: Los Angeles Price Drops Continue Moderation

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). For the full source data behind this post, plus seasonally adjusted and tiered price data, hit the S&P/Case-Shiller website. 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. – May data is released in July).

Before we dig into the data, I’d like to make a brief mention of an excellent post over at the economics website Calculated Risk: A Few Comments on Housing Reports. Quoting from his post:

…the Case-Shiller report today really bothered me. To be more accurate, the reporting on the Case-Shiller report bothers me. As I mentioned earlier today, there is a strong seasonal component to house prices, and although the seasonally adjusted Case-Shiller index was down (Case-Shiller was reported as up by the media) – I don’t think the seasonal factor accurately captures the recent swings in the NSA data.

Keep in mind that the Case-Shiller data that most of the media (including this blog) are reporting on is usually the raw index data. As CR mentioned, the housing market is a very seasonal beast, so it’s difficult to draw any meaningful conclusions from month-to-month changes, unless they are far outside the norm for that time of year. This is why we consistently report the year-to-year change in our summary.

Now that we’ve got that out of the way, here are the basic Case-Shiller stats for the Los Angeles area (which Case-Shiller defines as LA and Orange Counties) as of May:

May 2009
Month to Month: Down 0.1% (raw)
Month to Month Down 0.9% (seasonally adjusted)
Year to Year: Down 19.8%
Change from Peak: Down 41.9% in 32 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 (July 2003).

(All of the charts below are based on the non-seasonally-adjusted Case-Shiller HPI data.)
la-case-shiller-peak_2009-05

Home prices in Los Angeles continued to decrease in May, just barely. Of course, spring is usually a period of relatively strong home price gains. That said, the rate of YOY declines has been dropping since November’s data, so we’re definitely continuing on a trend of moderating declines.

socal-case-shiller-yoy_2009-05

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

case-shiller-redfin-markets_2009-05

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_2009-05

It’s also worth keeping in mind that in addition to being from a usually-strong time of year, these numbers represent home sales that closed during the frenzy of interest rates in the fours and the debut of the $8,000 first-time homebuyer tax credit. In my opinion, we won’t really know if home price declines are mostly over until we see the data from October / November. And that advice is worth exactly what you paid for it ;^)