Case-Shiller: Summer Surge Seen in All Price Tiers

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). Starting this month, we will be basing all of the charts in this series of posts on the seasonally-adjusted data provided by S&P. For the full source data behind this post, plus non-seasonally adjusted and tiered price data, hit the S&P/Case-Shiller website. 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. – August data is released in October).

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

Sixteen of the twenty metro areas tracked by Case-Shiller saw an increase in their respective seasonally-adjusted HPIs between July and August. Only Cleveland, Las Vegas, Charlotte, and Seattle marked seasonally-adjusted drops month-to-month.

Here’s a look at San Diego’s latest tiered data, back through 2000:

The low tier has risen the most in this sudden summer surge, though not by a large margin (+3.55% in two months vs. +3.46% in three months for the middle tier). Given that much of the bounce has been attributed to the $8,000 tax credit available only to first-time buyers, it is not surprising to see the low tier perform slightly better.

In many other markets the low tier is seeing a more pronounced advantage, my theory as to why this is not the case in San Diego is that prices across all tiers here had already fallen quite a bit further than they had in other markets before this summer’s government intervention.

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

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.

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

According to a Reuters story from earlier today, Robert Shiller has described the sudden spike seen in many markets this summer as potential “bubble territory.” I agree. As I have discussed on these pages in recent months, the sudden and simultaneous nature of this price uptick does not bear any marks of a return to fundamentals, but instead seems to be driven almost entirely by a mad dash for cheap loans (interest rates in the 5s) and free money ($8k tax credit).

I’m a little bit concerned that by interrupting the natural correction of the housing market, recent government intervention is setting us up for even more pain down the road. I hope I am wrong.