Case-Shiller: Tax Credit Pre-Expiration Rush Boosts Prices in May

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. – May data is released in July).

Here are the basic Case-Shiller stats for the Seattle area* as of May:

May 2010
Month to Month: Up 1.2%
Year to Year: Down 1.4%
Prices at this level in: April 2005
Peak month: July 2007
Change from Peak: Down 23.7% in 34 months
Low Tier: Under $262,524
Mid Tier: $262,524 to $401,143
Hi Tier: Over $401,143

Only one of the twenty metro areas tracked by Case-Shiller saw a decrease in its HPI between April and May (vs. 2 March to April): Las Vegas was down just a hair, losing 0.5% on the month.

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:


All three tiers saw a nice boost in May, but the high tier gained the most, increasing month-over-month at a yearly rate of nearly 16%. This was the opposite effect of what was seen in most other markets around the country, where the tax credit gave the low tier the biggest boost, although the spread between the month-to-month increases in Seattle’s three tiers was small enough as to basically be a wash. The low tier was up 0.8%, the middle tier rose 1.0%, and the high tier increased 1.2%.

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%:


The pre-expiration tax credit boost that began in earnest in April continued in May, and will likely carry on at least through June. No guarantees about the second half of the year though.

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.

*[Case-Shiller defines Seattle as the Seattle-Tacoma-Bellevue, WA Metropolitan Statistical Area, which includes all of King, Pierce, and Snohomish counties.]

  • Chris

    Thanks for the data. I appreciate the stats and figures.