SF Case-Shiller Home Price Index Increases Again

S&P Case-Shiller Overall Home-Price Index for San Francisco Metro Area Increases for 2nd Consecutive Month in May

Case-Shiller High Tier Price Index Shows 3rd Consecutive Increase

The Paragon Real Estate Group July 27, 2011 Update

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The Case-Shiller Index Deciphered
For the San Francisco (City & County) Real Estate Market

The S&P Case-Shiller Index report for May 2011 (released 7/26/11) indicated a second consecutive increase in home prices for the San Francisco Metropolitan Statistical Area (MSA). This is based upon the overall, aggregate Case-Shiller analysis of home sales data for the 5 counties of San Francisco, Marin, Contra Costa, Alameda and San Mateo. It is this aggregate Case-Shiller Index that the media typically quotes in their news reports.

However, the aggregate Index is the wrong Case-Shiller Index to use when assessing market trends in the city and county of San Francisco itself (as opposed to the 5-county San Francisco MSA). Here are some important points to remember about the Index:

The main C-S Home Price Indices track price trends for houses only — condos, co-ops, TICs and multi-unit buildings are NOT included. San Francisco contains only 12% of the house inventory in the MSA, so the aggregate Index is heavily skewed toward the other counties’ markets. Market conditions can vary widely between counties and indeed between neighborhoods within counties.

There is typically a 4-8 week time lag between offer-acceptance and closed sales: thus one month’s Index mostly reflects market activity in the two previous months. Since the Index itself is published 2 months after the month in question, the May Index is a snapshot of the market that is already 3 to 4 months old as of today in late July.

Furthermore, Case-Shiller tracks not only overall aggregate house prices, but price trends broken into 3 price tiers: low, middle and high — dividing the total number of sales into thirds. And the conditions and trends in these different price segments have been very different over the past few years.

The “High Tier” price range is defined as those houses selling for over $580,000 – $600,000 (the exact number changes monthly). In the city of San Francisco, over the past 12 months, roughly 69% of all our house sales were in the High Tier price segment. If we exclude the two least affluent, southern Realtor districts running from Bayview to Oceanview (hit hardest by foreclosures and distress sales), and look only at the 8 central and northern Realtor districts, then about 89% of our house sales were in the High Tier. (There are 10 SF districts in all. And for the record, the majority of our condo sales is also in the High Tier segment.)

The May C-S Index report indicates that home values for the High Tier segment of the SF MSA have now increased for the third consecutive month. This parallels the strengthening of the real estate market we have experienced in San Francisco since early 2011.

Nationally, as well as in the state, Bay Area and the city of San Francisco, the lower the price segment, the harder it has been hit by distress sales (bank-owned property and short sales). The greater the percentage of distress sales in a given neighborhood, the larger the decline in value over the past 3 to 5 years. Thus, though all have seen significant declines, the least affluent areas have been hit hardest with value declines and the more affluent neighborhoods have been least affected.


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It’s clear that the Case-Shiller High-Tier Price Index for the San Francisco MSA is the Index most applicable to the home market of the city and county of San Francisco itself. Indeed, San Francisco, whose 8 central and northern districts currently have a median house sales price of approximately $850,000, should probably have its own “Upper High-Tier” Price Index, which would probably vary even further from the aggregate Index results.

Looking at the chart at the top of this article of the Case-Shiller Index High Tier price points in January of each year since the year 2000, we see the large, fast appreciation to peak values in 2006 – 2008 (different neighborhoods of the Bay Area and the city peaked at different times within that time period); then, after the September 2008 financial markets crash, there was an 18% – 22% decline to January 2009. That seems generally correct as an overall average for the price adjustment that occurred in San Francisco’s 8 central and northern districts.

As seen in the second chart, the scale of the difference in impact on the respective price segments and on their associated areas of the Bay Area is enormous. Thus, the aggregate Index typically quoted in news articles and real estate blogs vastly overstates the decline in values for most of San Francisco, and often misrepresents current trends as well. (The 2 southern SF districts, dominated by sales in the upper-low and mid price tiers and hard hit by distress sales, saw declines typically running from 30% to 45%.)

Post market meltdown, January 2009 to present, the Index for High Tier priced homes now shows a further decline of less than half a percent.

Furthermore, based upon what we’re seeing in the city market, both statistically and in the hurly burly of deal-making — i.e. a new influx of high-tech buyers and a significant tightening in the supply and demand dynamic within SF — we believe there is a good chance the Index will indicate further upticks in High Tier home prices in coming months as well. Remember than the May Index mostly reflects March and April market activity, and San Francisco has seen a very busy late spring, early summer home market.

If that continues in a sustained manner, it might be yet another indication that San Francisco home prices did indeed hit bottom in 2009-2010 and are now starting to recover.

For a more complete overview of market statistical trends in San Francisco, there are links to additional analyses below. Further information on the data points and methodology of the S&P Case-Shiller Home Price Index is publicly available on their website.

Statistics are generalities, subject to fluctuation due to a variety of reasons. All information herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. The Case-Shiller data referenced above is from their non-seasonally adjusted Indices. The price ranges of the tiers adjust to a small degree each month depending on sales: lately the high tier has started at $575,000 to $600,000.

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