Case-Shiller: Washington Home Price Declines Accelerate

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 the DC area* as of September:

September 2008
Month to Month: Down 2.2%
Year to Year: Down 17.2%
Change from Peak: Down 24.4%

The following chart shows the Washington 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 Washington HPI was lower than it was in the latest data (June 2004).

Washington peaked at around the same time as most other Case-Shiller-tracked cities, but has declined slightly more than average, as the latest data shows prices off nearly a quarter below the peak.

Since the peak, home prices in Washington have been consistently declining, at roughly the same rate that they increased from mid-2004 to early 2006. Although price declines appeared to be slowing down earlier this year, the rate of decline accelerated again in September.

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

In spite of all the government jobs in the DC area, Washington’s price decline has been similar in scale to San Diego’s, on an approximately six-month lag. The values for the 20-city composite HPI also fall fairly close to DC’s price drop pattern.

I would say that the bottom line for DC is that home prices here are softer than many other parts of the country, and currently show no indication of reversing their downward trend. If you’re a home seller in today’s market in DC, it will likely be better to price your home realistically for the market today than to realize six months from now that you have to adjust it down another 5-10% just to catch up with the market.

*[Case-Shiller defines Washington DC as the entire Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area, which includes all of the District of Columbia and all or part of the following counties: Calvert MD, Charles MD, Frederick MD, Montgomery MD, Prince Georges MD, Alexandria City VA, Arlington VA, Clarke VA, Fairfax VA, Fairfax City VA, Falls Church City VA, Fauquier VA, Fredericksburg City VA, Loudoun VA, Manassas City VA, Manassas Park City VA, Prince William VA, Spotsylvania VA, Stafford VA, Warren VA, and Jefferson WV.]