Case-Shiller: Home Prices Dipped Across the Board in October

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. – October data is released in December).

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

October 2010
Month to Month: Down 1.3%
Year to Year: Down 4.1%
Prices at this level in: February 2005
Peak month: July 2007
Change from Peak: Down 25.6% in 39 months
Low Tier: Under $259,821
Mid Tier: $259,821 to $402,705
Hi Tier: Over $402,705

All twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between September and October (vs. 18 August to September). Only four markets posted year-over-year gains: San Francisco, San Diego, Los Angeles, and Washington DC.

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

Sea-Case-Shiller-Tiers_2010-10

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

Sea-Case-Shiller-Tiers_2010-10

Pretty much an even spread of losses across all three tiers this month. Month to month, the low tier was down 1.5%, the middle tier fell 1.3%, and the high tier decreased 1.3%.

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

Case-Shiller-Redfin-Markets_2010-10

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_2010-10

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

Case-Shiller-2009-Bounce_2010-10

With the post tax credit home price double dip now in full effect across the board, I think it’s about time to retire this last chart.

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.

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

  • http://www.danielhoang.com danielhoang

    Have you done any technical analysis on the data? First off, I'm not an expert.

    I took the seasonally adjusted data and plotted Seattle for all the available data. If we look at the steady increase around 1990 to 1997 and assume that was steady growth and extrapolated that to the future, it creates a resistance line. Then I plotted a line charting the recent declines from the peak to present day and extrapolated that. Assuming no artificial intervention, those lines intersected a little above the 100 point, taking us back to prices around 2000.

    Since unemployment isn't improving, our national debt increase, the prospect of increasing taxes, and the eventual increase in interest rates, it seems feasible to see 2000 prices again, basically resetting the system.

    • Jonathan_gardner21

      Hi Daniel, I did a similar analysis not too long ago & came up with 2002 as the price point that would make sense before buying a house in SEA. Either way, “do not buy now” is the answer. Personally, I'll be surprised if the market drops to that level. I expect further erosion of another 5% next year, but then expect prices to stay somewhat flat for several years until the “reset” will have occurred.

      How do you account for any renovations done to a property? Are you going back to 2000 prices & then giving a %, such as 50%, for any major improvements?

      Nice analysis…..

      JG

      • OldTechGuy

        Thanks, both of you… I was thinking of doing a siilar analysis.

        I think the methodology of Case-Shiller is supposed to take into account renovations. Note that you also have “real” (that is, physical – not tax) depreciation in properties over time, and C-S would have to take into account the impact of both of these issues over the full housing stock in a market. I suspect there is significant variation between markets; the real depreciation in Detroit is likely higher than, say, in Phoenix, and the average investment in renovation in San Francisco is probably higher than in Cleveland. (It would be interesting to see market-by-market analysis of this, if it exists).

        In any event, while I (like Daniel) am not an expert… and I am usually loathe to just trust those who call themselves “experts”, the C-S work has been around for a while, has been through a lot of critiques, so I do suspect this type of change is included. Does anyone know this, explicitly?