Case-Shiller: Home Prices Continue to Plummet in San Diego

Time for a 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. – October data is released in December).

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

October 2008
Month to Month: Down 3.0%
Year to Year: Down 26.7%
Change from Peak: Down 36.4%

The following chart shows the San Diego HPI scaled such that the November 2005 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the San Diego HPI was at or lower than it was in the latest data (March 2003).

San Diego home price declines gained even more steam in October according to Case-Shiller, with the pace of price drops set in late ‘07 having held fairly steady now for over a year. San Diego’s largest month-to-month price drop was 3.4% in November 2007, so October’s drop, while certainly quite severe, was not the biggest.

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare San Diego’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.

Of the eight markets Redfin serves, San Diego home prices have fallen the farthest, and the duration of their decline is bested only by Boston.

Looking at this latest data, there still does not appear to be any bottom in sight for San Diego home prices. If you are a seller that took your home off the market for the winter hoping for a rebound in spring, the current trends point toward continued disappointment. Of course, for buyers continued price drops means continually better deals to be found.

City/Town/Neighborhood December Price Reduction Update

Let’s take another 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. 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 38 cities/towns we ranked in the San Diego area this month, 20 had price-reduced ratios of fifty percent or more. Encinitas, Poway, Ramona, Granite Hills, and Coronado all made the top ten last month and this month, with a consistently high volume of price reductions.

Getting a little more granular, let’s look at the top ten San Diego area neighborhoods for price reductions:

44 of the 106 neighborhoods we ranked in the San Diego area had a price-reduced ratio of fifty percent or more. Torrey Highlands, Park West, Village, Kensington, and Ocean Beach all carried over from last month’s top ten as well.

Unfortunately, there do not appear to be any particularly strong patterns in the data that suggest where to look for sellers that might be more willing to negotiate a lower price. However, there does seem to be some consistency from month to month in the neighborhoods with lots of price reductions, so I recommend that bargain-hunters download the full data set and sift through it for their preferred neighborhoods.

Where are buyers getting the biggest discounts?

While the number and speed of price reductions is certainly interesting information (to some), what really matters to folks out there in the market right now is the size of price reductions. Better yet, how receptive are sellers to accepting an offer below their asking price?

Let’s get down to the nitty gritty. Where are buyers currently getting the biggest discount off the asking price in the San Diego area? Knowing which neighborhoods are softer in terms of sale price discounts off list price will better equip you when making an offer.

In the charts below, we have taken all sales data from the last three months in Redfin’s San Diego coverage area and sorted it by zip code. We calculated the overall difference between the sale price and the list price. Note that this reflects the final list price, after all price drops in the listing. Any zips with fewer than ten sales are excluded from the top and bottom ten rankings, but interested readers may download the full data summary in Excel 2007 format.

Here are the top ten zip codes with the largest overall discount:

Most of the areas selling at a large discount from asking price are relatively expensive, with six of the top ten zip codes coming in with list and sale prices over one million. None of the top ten zips came in with an average sale price below $600,000.

28 of the 79 zip codes we ranked came in with discounts under 2%, indicating that either buyers are more willing to pay asking price or sellers in those regions are better at pricing their homes appropriately to the market in the first place. Unlike the top ten discounted zip codes, none of the bottom ten had an average sale price over $400,000.

In general, there is a distinct trend of homes in neighborhoods with lower average prices selling closer to asking price. For the real data addicts out there, here’s a chart that visualizes that:

Keep this in mind if you’re thinking of making a below-list offer. Statistically speaking, the more expensive the neighborhood, the more likely sellers are to accept a lower priced offer (compared to asking), and vice versa.

Of the 5,567 sales we tracked in the 3-month period, 76 homes (1.4%) sold for 20% or more off the asking price, and 547 homes (9.8%) sold for 10% or more off the asking price. 1,879 homes (33.8%) sold for more than asking price.

It will be interesting to keep an eye on this data once we have been able to run it for a number of months, to see which neighborhoods are trending toward larger discounts and which are trending toward selling at full price.

I think the takeaway from this data is that when crafting an offer, buyers should be aware that not all neighborhoods are created equal. An offer 10% below list price may be accepted in a neighborhood where buyers are few and far between (usually the higher-priced neighborhoods), but some areas are still seeing enough interest to command full price or even more.

Case-Shiller: San Diego Home Prices Continue Steadily Downward

While most of us were out enjoying the holiday break last week, the folks at S&P/Case-Shiller released the latest data for their home price indices, which provides the most accurate measure of single-family home price trends for twenty markets across the country. Since S&P’s coverage conveniently includes each of the eight markets that Redfin provides service in, let’s take a look at the home price data from the S&P/Case-Shiller Home Price Indices (HPI).

Before we get to the charts, let me give a brief explanation of what the Case-Shiller HPI is. To calculate the index, they look at repeat sales of single-family homes over an “arms-length” period of time. Home sales that include things like major remodels, property splits, and sales between family members are disregarded, and sale pairs are weighted based on the length of time between each sale. After all this, the current month’s data is used to calculate a three-month rolling average which is the reported HPI. Data is released on the last Tuesday of every month, for the period two months prior (i.e. – September data is released in November).

For a more detailed explanation of their full process, check out their methodology pdf.

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

September 2008
Month to Month: Down 2.4%
Year to Year: Down 26.3%
Change from Peak: Down 34.4%

The following chart shows the San Diego HPI scaled such that the November 2005 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the San Diego HPI was at or lower than it was in the latest data (May 2003).

In other words, current home prices in San Diego are at early 2003 levels, and still falling. San Diego was one of the first Case-Shiller-tracked cities to reach a peak price, and is near the front of the pack in total price declines so far. At this time, home price declines in San Diego show no sign of slowing soon.

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

With a peak HPI of over 250, San Diego experienced more price inflation than nearly every other Case-Shiller-tracked city.

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.

Nearly three years into the trend of declining home prices, San Diego has experienced larger discounts than any other Redfin-serviced city. If home price declines continue at their present rate, San Diego will reach 50% off the peak sometime around September 2009.

Good news if you’re a potential homebuyer in San Diego, bad news if you’re trying to sell. With home prices falling as fast as they have been here, it is critically important for sellers to price their home appropriately, or they risk chasing the market down.