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Case-Shiller Index Shows Home Prices Drop To New Lows

But analyst points out it doesn’t reflect the value of all homes

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The latest Case-Shiller home price index has more bad news for the housing market.

— The latest Case-Shiller home price index shows American home values in the first quarter of 2011 dropped to the lowest levels we’ve seen since the housing bust began. Nationwide, home prices have returned to the levels we saw in mid-2002.

In San Diego, March home prices were down 4 percent compared to the previous year. San Diego prices were down .08 percent in March compare to the previous month.

Southern California trends reflected the trends in nearly every American home market. Minneapolis, at 10 percent, had the highest annual decline. Of the 20 metropolitan areas Case-Shiller examines only Washington D.C. experienced a home-price increase.

The new numbers seem to indicate further deterioration of the U.S. housing market. But some experts say that’s not necessarily true. John Karevoll, a housing analyst for Dataquick Information Systems, said we should keep in mind that Case-Shiller is measuring a market that’s dominated by sales of distressed properties.

“The Case-Shiller Index monitors buying and selling activity that actually happens,” he said. “It doesn’t monitor activity that doesn’t happen, so the dormant parts of the market don’t contribute to the index.”

Karevoll said the sale of so many homes that have gone into foreclosure makes the home market look more depressed than it actually is. He believes the housing market hit its “true” bottom last year, and if you appraised every home in San Diego County every month you would see a market trend that was very different.

Karevoll expects the dormant part of the market will be reflected in sales indexes, like Case-Shiller, when banks make it easier for homebuyers to get a mortgage.

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