All three tiers of the Case-Shiller Home Price index for San Diego experienced big declines in December. The low-priced tier’s 3.8 percent decline and the mid-priced tier’s 3.3 percent drop from November were pretty much in line with what we’ve seen in recent months. This time, however, the high-priced tier joined the fun, dropping 3.1 percent from the month prior. The aggregate index encompassing all San Diego homes fell 3.4 percent.

For the year 2007, the final tally was: low-priced homes down 23.1 percent, mid-priced homes down 16.0 percent, high-priced homes down 8.6 percent, and the aggregate index down 15.0 percent.

The accompanying graph indicates the decline that each price tier has experienced from its respective peak. As of December, the aggregate price index had declined by 19.1 percent from its peak in November 2005.

Despite the rather steep price declines to date, San Diego homes are still substantially overvalued in comparison to historical fundamentals such as local rents and incomes. I will examine this topic and update some historical housing valuation charts in the weeks ahead.

— RICH TOSCANO

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