Case-Shiller: Low Tier Home Prices Take a Beating in February

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.

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. – February’s index represents the average of the data from December through February).

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.

For the full source data behind this post, hit the S&P/Case-Shiller website (requires free registration). 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. – February data is released in April).

Note: We had been generating our charts in these posts using the seasonally-adjusted index, but based on a recommendation from S&P/Case-Shiller (pdf), we are switching to the raw index until otherwise noted.

Here are the basic Case-Shiller stats for the Portland area* as of February:

February 2010
Month to Month: Down 2.4%
Year to Year: Down 4.8%
Prices at this level in: April 2005
Peak month: July 2007
Change from Peak: Down 23.0% in 31 months
Low Tier: Under $206,316
Mid Tier: $206,316 to $284,626
Hi Tier: Over $284,626

Nineteen of the twenty metro areas tracked by Case-Shiller saw an decrease in their respective HPIs between January and February (vs. 18 December to January). Only San Diego saw a month-to-month increase.

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

PDX-Case-Shiller-Tiers_2010-02

All three of Portland’s tiers dropped off between January and February, with the low tier taking the hardest hit, falling a dramatic 3.4% in just a month (for context, that’s an annualized rate of 34%). The middle tier dropped 1.9%, and the high tier fell 2.1%.

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

Case-Shiller-Redfin-Markets_2010-02

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_2010-02

Here’s the flip side of the peak decline chart—a graph since January 2009, indexed to January 2009 = 100%:

Case-Shiller-2009-Bounce_2010-02

Only San Diego still seems to be riding the tax credit high. Even in San Francisco, where prices soared over 10% from March to November, is beginning to soften again. Over half of the markets that Redfin serves are now back below their January 2009 level.

*[Case-Shiller defines Portland as the Portland-Vancouver-Beaverton, OR-WA Metropolitan Statistical Area, which includes all of Clackamas, Columbia, Multnomah, Washington, Yamhill, Clark, and Skamania counties.]