The Case-Shiller Home Price Index, which compares same-home sales and is thus superior to the median sales price as an indicator of pricing power, declined once again in June. The HPI for San Diego was down 7.3 percent since June 2006 and 7.6 percent since it peaked in November 2005.

There are a few items worth noting. The first is that the HPI represents a single aggregate price measure for all of San Diego. As a result, it is overstating price declines in the more expensive areas that have maintained their pricing power relatively well (so far, anyway — I suspect that trend may be changing as you read this). By the same token it is understating the price declines in areas that have been harder hit so far.

Second, as with all price-measuring methods that utilize recorded transaction prices, the Case-Shiller HPI is likely overstating overall pricing power because it does not take account of incentives, concessions, or improvements.

Finally, as the accompanying graph shows, the plain-vanilla median sale price for resale single family homes surged upward in June despite the HPI’s indication that prices actually fell in aggregate. The median price has been giving false readings ever since the subprime crisis began late last year, yet it inexplicably continues to be the favored price indicator for many analysts and industry groups.

— RICH TOSCANO

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