Case-Shiller: San Francisco Home Prices Getting Hammered

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).

I apologize for my tardiness in this post. Future posts regarding the Case-Shiller data will be more timely.

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 the San Francisco area* as of September:

September 2008
Month to Month: Down 3.9%
Year to Year: Down 29.5%
Change from Peak: Down 33.4%

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

Home prices in San Francisco have been in rapid decline since late last year (after starting out the decline slowly), and according to the September data, that trend does not appear to be slowing down soon. San Francisco’s drop of nearly 4% was the largest month-to-month decline among the twenty cities tracked by Case-Shiller.

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

Price declines in San Francisco have been surprisingly large, considering that home prices did not get as ridiculously high as other California cities such as Los Angeles and San Diego. At the peak, San Francisco’s HPI was right in the middle of the Redfin-serviced pack, with an HPI higher than Boston, Chicago, and Seattle, but lower than Los Angeles, San Diego, and Washington. As of September, San Francisco now has the lowest HPI of the bunch.

Home sellers in San Francisco would do well to price their homes accordingly in the area’s especially harsh market. Compared to a couple years ago, home buyers can find some amazing deals, but anyone looking to buy right now should definitely go in with a full awareness that continued price declines are highly likely at this point.

*[Case-Shiller defines San Francisco as the San Francisco-Oakland-Fremont, CA Metropolitan Statistical Area, which includes all of the following counties: Alameda, Contra Costa, Marin, San Francisco, and San Mateo.]