Case-Shiller Index Rose in July, But Underlying Home Price Pressure was Down

The Case-Shiller index of San Diego home prices rose by .1 percent in July:

However, the seasonally-adjusted version of the same index fell by a full 1 percent:

What these two pieces of information mean together is that while actual prices might have risen a bit through July, the increase was solely due to typical July seasonal strength, and that prices would have actually fallen if it weren’t for that seasonal boost.  So prices were up, but the underlying pricing pressure in the market net of any seasonal influences (which is arguably more important in determining health of the housing market) was down.  Note that the seasonally-adjusted price series has declined almost continually since the housing tax credit stimulus wound down in the first half of 2010.

The above two graphs begin at the trough that was reached in early 2009; the following start at the late 2005 housing market peak.  First, the changes for all three price tiers since the peak:

…and second, the same graph adjusted for inflation:

This second graph shows that aggregate San Diego prices were nearly at new inflation-adjusted lows, and that the mid-priced and especially the high-priced index tiers had already reached new inflation-adjusted lows earlier this year.

More recently, the median price per square foot for San Diego resale homes took a bit of a hit in August. 

The median data is noisier than the Case-Shiller data, but they do tend to trend together directionally, so last month’s median price movement suggests further deterioration in the next Case-Shiller release.

Rich Toscano is a financial advisor with Pacific Capital Associates*.  He can be contacted at rtoscano@pcasd.com.