Every day can’t be a laugh-fest.
The Standard & Poors/Case-Shiller® Home Price Indices through December, 2007 were released yesterday. According to S&P:
(The indices) measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions.
By relying on sale pairs, the methodology is intended to be an apples-to-apples comparison. For those with a little free time on their hands this morning, you can indulge yourself in a complete description of the index methodology.
The chart below shows the ten-year trend of the U.S. National Home Price, the 10-City Composite and the 20-City Composite Indices.
The decline in the S&P/Case-Shiller® U.S. National Home Price Index — which covers all nine U.S. census divisions — neared double digits, posting -8.9% versus the 4th quarter of 2006, the largest decline in the series 20-year history. During the 1990-91 housing recession the annual rate bottomed at -2.8%. The 10-City Composite also set a new record, with an annual decline of 9.8%. In December, the 20-City Composite recorded an annual decline of 9.1%
Here is what the breakdown looks like by metro area:
Source: Standard & Poors, data through December 2007
True to form, I will not attempt to embark on an in-depth analysis of this data. I will, however, make a couple of observations:
- These indices are for single-family detached homes only. In our San Diego housing market, condominiums are generally fairing worse.
- As apples-to-apples as the the paired sales methodology is, today’s fruit basket of recordings often involve seller credits and buyer incentives not reflected in the recorded sale price. Therefore, the true price differences may very well be understated.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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Kris – I was all prepared to comment on this until I checked the link you so thoughtfully provided to the SP/Case-Schiller Index Methodology. I’m on page 9 (of 40), so give me a a few hours (or a month?) to figure out the algorithms and I’ll be back to you. Right now all I have is a major headache. Thanks.
Hey! good meeting you at the blogger san diego meet up. I used to work for this place that made postcard mailers for real estate people. Their whole selling point was that each card could be personalized with the recipients name. I don’t know if that’s something you do but I can try to swing you a discount !
http://www.eudicor.com/
Kris:
“No buyer wants to feel like they’re going to buy a house today and it’s going to be worth less tomorrow,” Berg said.
Exactly. Well put.
As one of the many[?] non-realtor/real estate industry readers of your blog, I thank you for refraining from saying: “it’s a great time to buy so long as you plan to live there at least twelve years” or the like. Credibility points for you.
p.s., please let Steve work on the “bummer numbers” stuff, so you have more time to post your Erma Brombeckesq stories. Or at least work in another the red versus brown meatloaf sauce controversy. Things are a bit too grim out there.
I should have mentioned for your other readers that the quoted Kris Berg quote is from today’s “Voice of San Diego – Real Estate” article by Kelly Bennett.
Let’s see if I can provide the link (you may have to copy and paste into your browser):
http://tinyurl.com/3b99fo
Thanks Smithers. I’m somewhat offended (I think).
Ugh. I sort of wish you hadn’t linked, but I will take this opportunity to say that my choice of words was regrettable when delivered in this context. PLEASE know that I meant “lower-end” as in “more affordable.” We were comparing inland communities to La Jolla and others. Unfortunately, it didn’t come out as intended AT ALL.
Steve,
Don’t get me wrong. No one, and I mean NO ONE, does “bummer numbers” posts like you do.
There. Feelings all better?
Kris – No worries. (Edited so that we may keep our blog and our jobs.) Your head should be secure (for now).
Smithers – If you were licensed, you just lost it.
(Smiley face added by Kris because she knows how much you like them)
Oops. Definitely my bad. I didn’t even make the connection (but I do now!) Reason number 37 that I will never be in the real estate biz. OK, I’ll go away now. Your blog is safe, again.
“Therefore, the true price differences may very well be understated.”
I was hoping you’d point that out. Well done, great post! One thing I want to note (I know Kris picked this up, but some people might not have) was that the graph is a measure of change or delta. Anything below the middle line means that prices are still falling. So if you see it spike up later this year, prices are still going down. Just at a reduced rate.
My opinion is there really is no point in buying till that line gets back to the middle again. It’s not like you won’t have tons of selection then, and you can probably afford more house too
Sven – Thanks for clarifying the graph. At first blush, I almost made the same mistake (of thinking it was showig price trends). Steve and I were actually discussing that yesterday.
It’s good information – the thing is, it ONLY applies to the 20 metro areas it surveys. The problem with CS is that the information is taken to mean national, when it’s not even close to being national.
Thanks as always for the great information, I passively watch San Diego, and much of the west coast because of the amount of second home buyer’s I have coming from there.
I’ve always had a problem with CS for the reasons Christina mentioned. I tend to default to OFHEO numbers… not much better, but at least Utah has a couple of representative MSA’s on the list.
Keep up the good work.
Sometimes numbers are not always black and white. With a little artistry you can make the case for any point you are trying to make. For instance, here in Pasadena, we have been selling close to 50% fewer units in the last few months vs last year.
In our zip code 91103 to the west of the Rose Bowl you have million dollar homes and to the east you have the highest per capita rate of foreclosures in the city, yet the median price is now over $1MM. Why, simply becasue homes that were $625.0 are now high $4’s & low $500’s and are not selling.
So many of these studies and published data don’t provide an explanation of the housing market, other than its just down. Kind of like the business that continues to be profitable despite the fact that it is having to cut its margins and still sells less. What they failed to mention was that expenses have been cut to the bone.
Christina, Andy and Doug – You’ll get no argument from me. Numbers are funny that way. They can be anything you want them to be, yet for the metro areas surveyed and if you take the data in the context of a macro look, they are good indicators of our current behavior and trends.