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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


Aired 6/1/11

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.

A house for sale in San Diego.
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Above: A house for sale in San Diego.

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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Avatar for user 'HarryStreet'

HarryStreet | May 31, 2011 at 1:04 p.m. ― 5 years, 10 months ago

Glad to hear prices for homes are affordable. Too bad this doesn't mean anything to most Americans since the credit in our country is so poor. Not to forget the outrageous adjustable rates, the difficulty in obtaining a career vs a job that will allow one to pay a mortgage and save a little for a vacation, a child's education, food, and the like.

We've still got a lot of work to do.

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Avatar for user 'Bass_SD'

Bass_SD | June 1, 2011 at 1:55 p.m. ― 5 years, 9 months ago

I would have to disagree with the point of view stated by John Karevoll that the current lows are artificially depressed due to distressed sales. While these properties do represent a relatively large portion of the market compared to their historical share, if homeowners that are currently not selling their homes listed them, the increase in supply would just force those distressed properties to even lower valuations. As such I'd say the current lows are representative of the overall market conditions. Additionally, distressed sales have been playing a large part in the market for more than two of the past years, dismissing them as not representative of current price levels is not reasonable. Lastly, if current price levels are so 'artificially' low, why aren't unit sales picking up in order to capitalize on the low valued inventory that is available. Month's supply aren't declining to indicate that this is happening.

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Avatar for user 'Tom Fudge'

Tom Fudge, KPBS Staff | June 1, 2011 at 3:18 p.m. ― 5 years, 9 months ago

Here's how I put my question to Karevoll... I told him I bought a house in August of 2010, which is true. I told him it was located in a neighborhood with houses built in the 30s, 40s and 50s. The owners were long-term, so there wasn't much turnover in the homes and there were very few foreclosed properties (as far as I could tell). I asked him what would I get if I sold my house right now. Would I get less for it than I paid for it, more or about the same? He said I would get about the same because the value of the my house, and houses like it, have not gone down with the market that shows up in the Case-Shiller index. Obviously, my ability to sell the house would depend on there being enough people out there who had the financing to buy it. But his argument is my house has not lost value. Take it for what it's worth.

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Avatar for user 'Jim Johnston'

Jim Johnston | June 1, 2011 at 3:33 p.m. ― 5 years, 9 months ago

As a Realtor in North San Diego I can say prices are still dropping, but something most people don't realize is these short sales and foreclosures are TRASHED. I'm amazed people actually lived in those conditions. I've been in homes that needed $20,000-$30,000 of repairs just to make them habitable. A normal sale home is typically turnkey, so I do see the point of Karevell's comment about properties that are not on the market vs the distressed properties driving prices down.

The Case-Shiller Index is based on homes that did sell, and what is on the market are not only financially distressed properties, but cosmetically and even structurally distressed homes that require significant improvements that are not captured in the sales price. Once the cost of repairs has been done, the true cost of the house is then presented. But that's not in the index.

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