Case-Shiller: Home Price Double-Dip Warning Signs Mount

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. – July data is released in September).

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

July 2010
Month to Month: Up 0.7%
Year to Year: Up 9.3%
Prices at this level in: May 2003
Peak month: November 2005
Change from Peak: Down 34.1% in 56 months
Low Tier: Under $320,133
Mid Tier: $320,133 to $479,594
Hi Tier: Over $479,594

Seven of the twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between June and July (vs. 2 May to June): Charlotte, Tampa, Portland, Dallas, Denver, Phoenix, and Las Vegas.

The interesting data point I brought to your attention last month is now officially a trend, with two months in a row showing the same movement in the YOY chart below. Prices are still rising, but they are rising more slowly. In late 2008 when home prices began falling more slowly, it was an early signal of the eventual price increases we saw in early 2009. If this keeps up we’re basically guaranteed a double dip in prices early next year.

SD-Case-Shiller-Tiers_2010-06

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

SD-Case-Shiller-Tiers_2010-07

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

SD-Case-Shiller-Tiers_2010-07

Despite the absence of the federal homebuyer tax credit, all three home price tiers in San Diego continued to post gains in July. Month to month, the low tier was up 1.2%, the middle tier rose 0.8%, and the high tier increased 0.3%.

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

Case-Shiller-Redfin-Markets_2010-07

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_2010-07

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

Case-Shiller-2009-Bounce_2010-07

The high of the tax credit appears to be beginning to wear off in most places. Notice how the upward curves on the end of nearly all those lines are flattening out over the last couple months. I think we are headed for an interesting fall and winter when it comes to home prices.

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.