Wednesday, January 30, 2008

Case Shiller Index Way Down; Washington, DC Area Down 7.8% YoY

Prices for housing units continue to decline in most major cities throughout the USA. Los Angelos Time reports that:

Home values in major U.S. cities continued to fall at a record pace in November, with Southern California posting some of the steepest declines in a national index released Tuesday.

Miami saw a 15.1% drop in November compared to a year earlier, the worst among 20 metropolitan areas in the Standard & Poor's/Case-Shiller composite index. But an Diego was close behind with a 13.4% decline.

The November index of 10 metropolitan areas saw a year-over-year annual decline of 8.4%, the sharpest annual plunge since the index began in 1987. It was the second-straight record decline for the index, following a 6.7% drop in October

In the Washington, DC area the price index fell 7.8% compared with November 2006 . Prices continue to fall in the Washington, DC metropolitan area. In real dollars prices have fallen about 10% this past year.

For more numbers go to Case Shiller S&P Index. The prices declines in the metro area are accelerating with the Case Shiller S&P Index showing October 2007 prices declines 1.1%. For comparison purposes in November 2007 prices fell 1.8% (in that month alone). This housing bust is accelerating; expect further prices declines during the coming months in the Washington, DC area.


  1. Not between thirteenth, sixteenth, R and U Sts in NW!! Up, up and away in my rocket-ship rowhome!

  2. "In the Washington, DC area the price index fell 7.8% compared with November 2006"

    Yawn - Case Shiller is such a blunt tool to measure things by. Its definition of the "DC area" includes counties as far away as Spotsylvania, VA and Jefferson WV. How should someone inside the beltway glean any info from this index since its weighted heavily to include the implosion going on in the far out garbage counties?

  3. Case-Shiller really shows how a comparible house drops. Its a shame more detailed data is available, but its so much better than the information provided by the used home salespeople.

    But it doesn't matter how broad the regional measure is. We have a national home price decline driven by a huge national surplus of inventory.

    The bulls will claim otherwise. But always ask, are they trying to sell you something? Where are there blogs with more detailed data? The NAR controls the data! If there was information out there showing a rosier outlook, don't you think they would publish it? Instead we get the median, a truly worthless number. Case-Shiller points to the value change in an existing home.

    7.8% drop in one year is HUGE!

    Oh, I think David's prediction of a 6% to 13% drop October through March Case-Shiller is in the bag.

    Existing home values are dropping fast in DC. Those who can afford a home can now negotiate for ~8% more home for the same money. :)

    Got popcorn?

  4. It is very important to understand Case-Shiller if you are going to use it as a frame of reference.

    Case-Shiller is based upon defined Metropolitan Statistical Areas (MSAs). See for more information.

    The Washington DC MSA includes Jefferson County West Virginia, Spotsylvania County Virigina, Warren County, Virginia, and many other locales which, in reality, do not factor into a realistic "Metro DC" frame of reference.

    Its just a fact, not an argument.

  5. anon:

    By understanding how real estate works on the fringes.

    $450,000 condos in bang-bang shoot em up Petworth were sustainable only because of these very bubbles you are sneering about in Spotsylvania.

    For more on the "its different here/this time" see the wikipedia entry great depression c. 1929

  6. How come every time a HH notes values inside the beltway have held up thus far, the BH's respond by mockingly saying the HH's think "its different here"? Lets turn that argument around, are the BHs saying EVERYTHING IS THE SAME, or that ITS NOT DIFFERENT HERE? Really?

    If thats what they are saying, then the severity and magnitude of the downturn will be IDENTICAL EVERYWHERE in and around D.C. Are the places in Arlington going to commonly experience 50% price drops JUST LIKE, PWC? Is Alexandria going to have more foreclosures than sales JUST LIKE CULPEPPER CO? IS D.C. going to have 49 months of inventory JUST LIKE CLARK CO?

    The fact of the matter is, most people do think it is different here. There will be sales drops and higher inventory (there are already) and there will be foreclosures, and there will be price drops - I dont think there is any HH here saying that. However, there can be no doubt that whatever negatives are experienced inside the beltway the negatives that occurr way out there will be far far worse. So keeping this in mind, I say to all the BHs out there with full confidence - DAMN RIGHT IT IS DIFFERENT HERE!!!!

  7. Bubbleheads tend to fixate on statistics and estimates rather that the fact that over time owning is far cheaper (and better) than renting. I've said from the start I don't put much store in most statistics and estimates since by their very nature they are influenced by what the person putting them together is trying to prove. I've always said one should instead first take a look at the big picture, recognize the trend and then maybe look at stats and estimates to try to validate one's belief's about the general picture.

    Well, I just took a look at the zillow stats for my house, and low and behold, their stats for it are finally starting to reflect the big picture which anyone living here in the District (or really interested in living here) has known for at least the last few years. Values have continued to rise since I bought almost 3 years ago ... substantially.

  8. Click here Lance

    "Washington, D.C., New York City and London are the most popular cities in the world when it comes to foreign investors funneling money into real estate, according to a survey conducted by the Association of Foreign Investors in Real Estate."

    Not a sermon, just a thought.

  9. The concept you're all looking for is that of beta: the correlation of an asset's price with that of the broader market. Using the DC MSA as "the broader market", I suspect all houses in this area have a positive beta, but not all houses have to have beta=1. Alot of things would lead to higher betas: worse area (whether because it is far out or a bad neighborhood), worse lot, more "investors" with houses in the area they'll be dumping, etc... These will drop more than 7.8% this year (my friends in Reston believe their townhouse is down alomst 20% for example) while lower beta houses like SFHs near Metro stops in DC will probably tend to drop less than 7.8% (though still drop in real terms if not in nominal). This is exactly how things work in the stock market, too... tech stocks that sell capital equipment to other larger companies tend to have very high betas while regulated utilities have extremely low betas since their demand and prices are very inelastic.

  10. Just like it matters where you are in the metro area, it also matters where you are in DC. Some areas will fare better than others.

    Lance, why do you use Zillow stats to support your argument that stats aren't useful?

  11. md_renter asks:
    "Lance, why do you use Zillow stats to support your argument that stats aren't useful?"

    Because those same Zillow stats have been repeatedly quoted to me as "proof" that the value of my home had sunk to less than I paid for it. I agree, Zillow stats are no better than others ... possibly worse, especially in a market where houses aren't "cookie-cutter" images of each other and where the square footage of the lot is much more relevant than the square footage of the house.

  12. "Zillow stats are no better than others ... possibly worse, especially in a market where houses aren't "cookie-cutter" images of each other"

    I couldnt agree more. I tried to get an estimate on an Old Town house I was looking at, and the "comparables" Zillow gave me were mostly in Fort Washington, MD. If you live in a neighborhood where houses are prized (and priced) for their uniqueness, Zillow is completely useless.

  13. "Are the places in Arlington going to commonly experience 50% price drops "

    That's not going to happen but what a fantasy!

  14. The argument is the bears like to use statistics? ROTFLMAO

    DC Case-Shiller is now down 11% off the peak.

    Or are you saying DC is the only area where investors didn't flock in toward the 'high end' areas at the end of this Real Estate gold rush? Now that HELOC money is tightening up (oh, its still loose, don't expect that to last through 2008), we'll see who was swimming naked.

    I've seen 'high end' areas drop in price 40% before. DC isn't immune. Any DC investors in Florida are going to have to find a way to raise cash. Ghad... the over 10 years of inventory in Palm Beach still shocks me.

    Got popcorn?

  15. David,

    I just realized something about Case-Shiller. Its weighted most heavily to repeat sales spaced more than 6 months apart. Thus, Case-Shiller will bias towards representing the prices where sales are strong.

    Since the outer counties in the metropolitan district have sharp sales decreases compared to the outer counties... (See NOVA housing bubble fallout's decade of sales.)

    So the argument that Case-Shiller is weighted towards representing undesirable ares is a red-Herring. Case-Shiller will focus on the price changes on where sales occur by how the index is weighted. In other words, desirable areas.. (sales are down more in outer counties).

    Neat matrix math in the pdfs. Amazingly easy reads.

    Got popcorn?

  16. "So the argument that Case-Shiller is weighted towards representing undesirable ares is a red-Herring. Case-Shiller will focus on the price changes on where sales occur"

    Neil - you clearly dont know the geography of this area very well. The areas people are jocking (Arl, Alex & DC) is very small in relation to the rest of the MSA. Also, Case Shiller excludes condos which represent almost 1/2 of the inner area inventory, but only about 10% of the outer area inventory. Thus, if you look at the December sales per MRIS we get:

    Arl Alex & DC sales - 401 (total)

    Outside area sales - 2,714 (total)

    Thus, you can throw out all the "less than 6 month sales" you want, and you still have an index that is heavily weighted towards what you call the "undesirable areas".

    Nice try though.

  17. I see no difference between Warrenton/Manassas and, say, Columbia Heights. They both have a Target, right?

    Still waiting for that 4 bedroom corner house on E. Capitol Steet to drop below $250k. C'mon baby!