Case-Shiller: San Diego Showing Early Signs of a Double-Dip?

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 (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. – June data is released in August).

Here are the basic Case-Shiller stats for San Diego County as of June:

June 2010
Month to Month: Up 0.4%
Year to Year: Up 11.2%
Prices at this level in: May 2003
Peak month: November 2005
Change from Peak: Down 34.6% in 55 months
Low Tier: Under $317,086
Mid Tier: $317,086 to $475,049
Hi Tier: Over $475,049

Only two of the twenty metro areas tracked by Case-Shiller saw a decrease in its HPI between May and June (vs. 1 April to May): Phoenix was down just a hair, losing 0.02% on the month, while Las Vegas dropped 0.6%.

If you were reading these pages back in January and February of last year, you will recall that I was one of the first to point out the first signs of upcoming home price increases in SoCal. The data that caught my attention then was a reversal in the second derivative—the rate of change in the yearly rate of change. In other (less geeky) words, the YOY chart went from consistently heading down to heading up (even though the YOY value was still negative).

This month’s data brings another interesting change in the second derivative. The YOY chart for both San Diego and LA flipped again in June, heading back down. It’s only a single month of data, so it’s too early to call a trend, but it’s worth keeping an eye on just as we did in January 2009 (when the November 2008 data came out), before prices began shooting back up.


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


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


The low and middle tiers bumped up in June, but the high tier actually lost a bit of ground. Month to month, the low tier was up 0.8%, the middle tier rose 0.9%, and the high tier decreased 0.5%.

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


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.


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


Still feeling the final effects of the tax credit in most markets. Seattle and Phoenix appear to be the notable exceptions this month, with neither showing much of a gain over May.

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. – March’s index represents the average of the data from January through March).

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.