Case-Shiller Home Price Index

The Case-Shiller Index is generally considered to be the most reliable measure of overall home price changes for a region. The Index was designed by economists Karl Case, Robert Shiller, and Allan Weiss, and is now distributed  by Standard and Poors.  The data for a given month is for the period two months prior. This October data was released in December.

Here are the basic Case-Shiller stats for the Los Angeles area (LA and Orange Counties) through October, 2011:

Nineteen of the twenty metro areas tracked by Case-Shiller saw a decrease in their HPI between September and October (vs. eighteen from August to September): Only Phoenix saw an increase. Wait, Phoenix? Yes, Phoenix. Atlanta fell the most in October (again), falling a whopping 5.0% in a single month.

Here’s a look at the latest local tiered data, back through 2000:

And here’s a closer look at the recent changes, with the vertical and horizontal axes zoomed in to show just the last year:

All three of LA’s tiers fell in October, with the high tier taking the biggest hit. Month to month, the low tier was down 0.8%, the middle tier fell 0.9%, and the high tier decreased 1.5%.

In this next chart, I’ve visualized the month to month trends of all twenty Case-Shiller-tracked cities. Green and above the horizontal axis if they were increasing in the month charted, red and below the axis if they were decreasing. I’ve excluded 2000 through 2004 since they looked largely the same as 2005 (mostly green).

Just four months ago, all twenty cities saw month to month gains. Now just one is not the red.  Here’s a chart of Case-Shiller HPIs for 15 Major Markets:

Here’s our peak decline chart, in which we line up the peak Case-Shiller HPI value for 15 Major Markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

Two cities hit new post-peak lows in October: Atlanta is 33.2% off peak and Las Vegas is now 60.7% off peak.

Methodology: The Case-Shiller index tracks price changes in sets of homes of similar size and style to better determine changes in what people are willing to pay for the same home over time. If data is available from an earlier transaction for the same home, the two sales are paired and treated as a “repeat sale.” Repeat sales that are too far apart, sales between family members, lot splits, remodels, and property type changes (e.g. from single-family to condos) are excluded from the calculations. All remaining repeat sales are totaled together and weighted based on the time between each sale, then the data for the most recent three months is averaged together to create a given month’s index value (i.e. – September’s index represents the average of the data from July through September).

The three price tiers plotted in the charts below simply represent the top, middle, and bottom third of all sales, based on the initial sale price. In other words, if there were 3,000 sales in the three-month period, 1,000 of them would be in the low tier, 1,000 in the middle tier, and 1,000 in the high tier, by definition.

Information Compiled by Tim Ellis