As always, the Case-Shiller index of home prices arrives with a fairly major lag. The most recent index update was released last week, but only measures home prices through January. A further lag from reality is induced by the fact that each month’s index value reflects three months’ worth of trailing data — January’s number is calculated from sales that closed in November, December, and January. And of course, a sale closed in November represents a deal that was made at least a month before that. You get the idea.
So why look at such a lagging indicator when more timely data is available? Because the Case-Shiller index is the most accurate (or perhaps I should say least imperfect) measure of home price changes.
Those looking for an in-depth assessment of the manifold issues with measuring home prices can find one in the handy new “Backgrounders” section on the right side of the blog. The idea behind this section is, as the name would imply, to link to more in-depth background articles that may be of ongoing interest to Nerd’s Eye View readers. Most of the selected articles are older, but they all either concern an ongoing issue (e.g. the timeless topic of measuring home prices) or provide important background to how we got here (e.g. a contemporary assessment of the still-unbusted housing bubble). Newer readers are encouraged to check these background articles out, as my ongoing blog entries are written with the assumption that readers are familiar with these longstanding analytical themes.
If the attendant scrolling sounds like too much trouble, here’s a link to the article on measuring home prices.
Onto the graphs, in the usual order of expanding time horizon. The first one up starts at the early-2009 home price lows.
All price tiers were down for the month, with the high-priced tier (the most expensive one-third of homes sold during the measurement period) faring worst. The specific monthly changes were as follows: the low tier was down .6 percent, the middle tier down .5 percent, the high tier down 1.6 percent, and the aggregate index down 1.2 percent.
It’s interesting to note that much of the recovery has been undone for both the mid- and high-priced tiers (though the high tier never experienced much of a recovery at all). Then again, neither of those segments were as walloped during the bust as was the low-priced tier, as the following post-peak graph makes clear.
Despite the strength of its recent rally, the low tier has still dropped the most since the bubble peak. But once again, this makes sense when we zoom out yet another notch. The next graph shows price changes since 2000 and makes it clear that it was the lower-priced homes that went by far the most batty during the bubble, leading to the correspondingly uglier bust phase for the low tier.
And here for further perspective is a chart, inflation-adjusted, of prices since the tiered Case-Shiller index started in 1989.
Back to the present (or at least a few months beforehand), January’s aggregate Case-Shiller index was up a barely perceptible .1 percent on a year-over-year basis. As unimpressive as this sounds, San Diego was one of only two cities out of twenty whose Case-Shiller index was up for the year, the other one being Washington, DC. San Diego’s housing market is not exactly going strong, but it’s faring better than almost everywhere else.
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