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.