Case-Shiller: Los Angeles Home Prices Fall Back Into YOY Losses

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). The Case-Shiller data is generally considered to be the most reliable measure of overall home price changes for a region, since they only consider repeat sales of homes when calculating their index, instead of looking at all the homes that sold in a given month.

For the full source data behind this post, hit the S&P/Case-Shiller website. For a more detailed explanation of how the Case-Shiller Home Price Index 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 2010
Month to Month: Down 1.3%
Year to Year: Down 0.2%
Prices at this level in: October 2003
Peak month: September 2006
Change from Peak: Down 37.6% in 51 months
Low Tier: Under $309,109
Mid Tier: $309,109 to $506,475
Hi Tier: Over $506,475

Ninteen of the twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between November and December (the same as October to November). Washington DC’s 0.4% increase was the only month-to-month gain. In November there were four markets posting year-over-year gains. In December that number dropped to two: San Diego and Washington DC.

Here’s a look at the latest local tiered data, back through 2000:

LA-Case-Shiller-Tiers_2010-12

And here’s a closer look at the recent changes, with the vertical and horizontal axes zoomed in to show just the last year:

LA-Case-Shiller-Tiers_2010-12

All three tiers lost a fairly large amount of ground in December. Month to month, the low tier was down 1.3%, the middle tier fell 1.0%, and the high tier decreased 1.4%.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves:

Case-Shiller-Redfin-Markets_2010-12

Here’s our peak decline 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_2010-12

Eleven of the twenty cities tracked by Case-Shiller have hit new post-peak lows as of December. So far Los Angeles, San Diego, San Francisco, Denver, Washington DC, Boston, Minneapolis, Cleveland, and Dallas are still above their 2009 lows.

Methodology: The Case-Shiller index tracks price changes in sets of homes of similar size and style to better determine changes in what people are willing to pay for the same home over time. If data is available from an earlier transaction for the same home, the two sales are paired and treated as a “repeat sale.” Repeat sales that are too far apart, sales between family members, lot splits, remodels, and property type changes (e.g. from single-family to condos) are excluded from the calculations. All remaining repeat sales are totaled together and weighted based on the time between each sale, then the data for the most recent three months is averaged together to create a given month’s index value (i.e. – September’s index represents the average of the data from July through September).

The three price tiers plotted in the charts below simply represent the top, middle, and bottom third of all sales, based on the initial sale price. In other words, if there were 3,000 sales in the three-month period, 1,000 of them would be in the low tier, 1,000 in the middle tier, and 1,000 in the high tier, by definition.

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  • ryp

    Even adjusting for inflation over the last decade, it's clear that Los angles prices would still have to drop 25%-30% in the top two tiers to reach 2000 levels, and 20% just to reach the composite-20 level, and 2000 was far from a historic low point in SoCal real estate values. Given the stubborn unemployment rate, statewide fiscal crisis, no more tax credits, probable increases in interest rates, persistent foreclosure rates, and Fannie and Freddie's coming changes, I expect this will happen fairly steadily over the next two years, and there is a greater than zero possibility the downside could overshoot to mid-nineties inflation adjusted levels, meaning drops of up to 40% of where they are now.

  • Prockower

    This is such a cool site to see trends. All you have to worry about is what is going on in the areas you are farming. Information is key.

  • TonyB, South Pas

    ryp, I disagree with your assessment. Home prices have historically (going back to about 1900) appreaciated at about 4% per year. In the year 2000 the CS index for LA was 100. Now, 11 years later we should be at 1.04 ^11 = 153. The low tier plot has already gone below 153 and has increased since. It seems to me that the bubble ended in early to mid 2009 and we are now in a hopefully stable (flat) or healthy (few percent per year) growth

    • Realpropexpert33

      2000 indexed at 100 and so did other years for the past 100+ years. See link: http://www.reeves4congress.com

      Your calculation is incorrect because the index is just that, an index, and as such it incorporates inflation, etc. 

  • ipro-global

    Really awesome posting, with great knowledge. For these type of posting i am searching from last two months

  • http://www.statelandbrown.com Dan Statlander

    Enjoyed reading this post.

  • Hable

    Home prices in the Los Angeles are still over-inflated.  Those of you who disagree are either current homeowners who was expressing wishful thinking, or you're in denial.

  • GA

    What is best area to buy in oRANGE cOUNTY