Case-Shiller: DC Home Prices Buck National Trend in December

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. – December data is released in February).

Here are the basic Case-Shiller stats for the Washington area* as of December:

December 2010
Month to Month: Up 0.3%
Year to Year: Up 4.1%
Prices at this level in: May 2005
Peak month: May 2006
Change from Peak: Down 25.8% in 55 months
Low Tier: Under $291,070
Mid Tier: $291,070 to $465,576
Hi Tier: Over $465,576

Ninteen of the twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between November and December (the same as October to November). Washington DC’s 0.4% increase was the only month-to-month gain. In November there were four markets posting year-over-year gains. In December that number dropped to two: San Diego and Washington DC.

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

DC-Case-Shiller-Tiers_2010-12

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

DC-Case-Shiller-Tiers_2010-12

The low tier lost ground in December, and the middle tier pretty much carried the market up. Month to month, the low tier was down 0.4%, the middle tier rose 0.7%, and the high tier increased 0.1%.

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

Case-Shiller-Redfin-Markets_2010-12

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_2010-12

Eleven of the twenty cities tracked by Case-Shiller have hit new post-peak lows as of December. So far Los Angeles, San Diego, San Francisco, Denver, Washington DC, Boston, Minneapolis, Cleveland, and Dallas are still above their 2009 lows.

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 Washington DC as the entire Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area, which includes all of the District of Columbia and all or part of the following counties: Calvert MD, Charles MD, Frederick MD, Montgomery MD, Prince Georges MD, Alexandria City VA, Arlington VA, Clarke VA, Fairfax VA, Fairfax City VA, Falls Church City VA, Fauquier VA, Fredericksburg City VA, Loudoun VA, Manassas City VA, Manassas Park City VA, Prince William VA, Spotsylvania VA, Stafford VA, Warren VA, and Jefferson WV.]

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  • vad001

    Correct, thanks to record spending during the recession on the DC area, and the 5 counties surrounding DC now being the wealthiest in the country, DC prices have stayed at their elevated levels and have the farthest to drop to reach their historic norms. Plus an attrition policy of the federal government of around 10% means around 100,000 jobs being lost in the DC area of government jobs, probably three times that many for support services. Putting it all together, between now and the end of 2013 we should see prices drop around 35% to 40%.

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  • http://profiles.google.com/therealpartisan Partisan *

    “Putting it all together, between now and the end of 2013 we should see prices drop around 35% to 40%.”     

    BWAHAHAHAHA!!!!!!  Oh god, its hilarious how delusional some people are.  Sorry to say it, but DC in all likelyhood hit bottom in Mar 2009, and will never ever see that level again.  Sorry about that vad001.  Still, thanks for the laugh!!!

  • vad001

    Actually, false optimism is exactly the reason for the bubble.    It's like the passengers on the titanic thinking that surely it can't hit their cabin.   So, put it this way.

    1) it's probably that the federal government is going to have to shrink.
    2) right now expensive contracts are being replaced by less expensive contracts such as BAE over GD by hiring the same contractors doing the same job, but paying them 25% less.    
    3) the governments workforce is aging, and when they are replaced they will be replaced by people on the lower end ot the pay scale.
    4) all federal agencies, especially the largest ones, expect their budgets to be falling.
    5) both parties want a federal attrition of 3 to 2.   and the 2 that would be coming in are earning less money.
    6) the DC area is at the highest of the case/shiller index, around 180 the last time I saw.   Average for the last 80 years is 100.   All areas of the country except the DC area have seen their housing values start to normalize.

    So, fewer jobs paying less.   No economy other than the federal government, and the federal government will be shrinking.   Exactly how does one expect to sustain higher than normal housing prices? 

    I think we can see the reason, my advise is coming from an economist, yours is coming from a DC house owner, probably a real estate agent.

    • http://profiles.google.com/therealpartisan Partisan *

      Actually, not a real estate agent.  I am a buyer though.  Bought in 2009 when everyone told me the bounce was just a “blip” and we were nowhere close to the bottom. 

      As for how I suspect to maintain “higher than normal housing prices” my expectation is that austerity, as applied to this area will have roughly the same effect as the draw down after we won the cold war.  If you look at Case Shiller (CS) at the time, we saw a 5% drop from 1990-1992.  Thus, even if our drop now is twice as bad, that puts CS around 166 (just slightly above the 2009) bottom.

      Also, just so you know, your statement about CS that “Average for the last 80 years is 100″ – thats true, but that number is adjusted for inflation.  Yet the CS number you now site for DC “around 180 the last time I saw” is a NOMINAL number.  Thus, even if CS does normalize back to 100 in DC (the index value in year 2000), the NOMINAL CS value for DC would be roughly 133 if it “fully corrected” today.  This number will no doubt be higher in 2012, 2013 when you predict we hit bottom.

      In any event, the reason I laugh so hard at you is not so much that I doubt the effect of austerity on DC.  Instead I doubt the severity of the drops forecasted (I mean 35-40%???  In 2 years time???  Seriously?)

      By the way, prices have risen in the 5 months since you posted this “35-40% drop by 2013″ so your forecasts are looking worse and worse.  Given that you responded here, I guess you plan to stick with them for now.  As such, look toward every monthly redfin posting on Case Shiller as I will likely be mocking you as we get closer and closer to your 2013 date, and the 35-40% drops are still far far away…

    • Partisan

      Hey vad001 – see the latest DC case shiller?  Still holding strong above 187.  Just so you know, I am still here, laughing at you and your absurdly doomish prediction of it dropping down to 119 in (now) 24 months time. 

      I know you see this comment.  Care to respond?  Care to go ahead and admit you are wrong now in hopes the laughter (at your expense) doesnt continue?

      • Partisan

        DC Case Shiller Now above 189 and moving up. Again, for anyone reading this for the sake of posterity, I am showing how abject pessimism really affects one’s judgment – in this case, the poster VAD001 who thought DC case shiller would hit 119 in (now 16 months) time, whereas I said (1.5) years ago, that 165 was the bottom.

  • Partisan

    For the record, 6 months ago Vad001 predicted a “35-40% drop by 2013″.  At the time, DC case shiller was at 182.9.  In the last 6 months, DC case shiller has risen to 183.6, or just under 1%.  As such, for Vad001's prediction to come true, we now have to see a 36-41% drop in the next 30 months, meaning his prediciton is looking more and more delusional all the time.

    • Partisan

      One month later, DC is now at 187.8.  Remember, for Vad001 to be proven correct, DC needs to hit 119 in the next 29 months.  His prediction just keeps on looking worse and worse.