Case-Shiller: Signs of Eventual Stabilization in LA Home Prices?

I apologize again for the multi-week radio silence here. We’ve revamped our data delivery to be able to better streamline the whole process, and from now on there will be a regular schedule of in-depth data in this space. For now though, it’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI).

For an explanation of how the Case-Shiller data 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. – November data is released in January).

Here are the basic Case-Shiller stats for the Los Angeles area (which Case-Shiller defines as LA and Orange Counties) as of November:

November 2008
Month to Month: Down 2.2%
Year to Year: Down 26.9%
Change from Peak: Down 35.8% in 26 months

The following chart shows the LA HPI scaled such that the September 2006 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the LA HPI was at or lower than it was in the latest data (December 2003).

With last month’s drop in LA’s Case-Shiller HPI, prices have now effectively “rewound” five years. The rate of decline seems to have moderated somewhat since the spring, even as we head into the winter months, so that may be a good sign for those searching for a bottom.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare LA’s performance to other areas across the country:

And here’s one more chart, in which I have lined 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.

One interesting piece of data that is not visible in these graphs is the fact that the LA area’s rate of year to year price drops actually declined in November, for the first time since the market’s peak (a pattern also seen in San Diego). In November, the year to year decline was 26.9%, compared to October’s 27.9%. This could be the first sign of some kind of price stabilization here in SoCal. Of course, if price drops do continue to stabilize at this rate it will take until March 2010 before we do finally reach the bottom in home prices here in LA.

January City/Neighborhood Price Reductions

Let’s take our monthly look at which cities and towns have the most price reductions.

The following charts show the percent of MLS, FSBO or REO listings that were price-reduced at some point before leaving the market (either sold or removed unsold from the market) in the past 90 days. Cities/towns or neighborhoods in which the number of homes taken off the market was too small to provide believable estimates are excluded from ranking.

For those that are interested, I have uploaded the full data set in Excel format here (saved in Excel 97-2003 .xls format by request). In order to keep from overwhelming you with charts, I am leaving out the top ten cities/towns/neighborhoods with the least reduced-price listings from the post, but you can still see that chart in the downloaded file.

First up are the top ten cities with the most price-reduced listings:

Of the 112 cities/towns we ranked in Los Angeles County this month, 36 had price-reduced ratios of fifty percent or more. Signal Hill, Mayflower Village, La Verne, Westlake Village, West Hollywood, and El Segundo all made the top ten for the last three months.

Getting a little more granular, let’s look at the top ten Los Angeles County neighborhoods for price reductions:

78 of the 173 neighborhoods we ranked in Los Angeles County had a price-reduced ratio of fifty percent or more. Baldwin Hills and Sunpark both made the top ten for the third month in a row.

For home buyers, cities and neighborhoods that consistently remain near the top of the list for price reductions may be a good place to potentially hunt for bargains. Once a home has been on the market a while, many buyers tend to overlook it, even though a price reduction or two may have brought it into a more desirable price range.