Tiered price patterns behave differently across markets

S&P Indices publishes tiered price data for 16 of the 20 MSAs it covers.  Tier breakpoints – price levels that divide recent sales pairs in each market into thirds – are calculated for the latest monthly data. An index is generated using each of the three data sets per market, applying the same repeat-sales methodology as the aggregate.

Last month we looked at the similarities and differences across Atlanta, New York and San Francisco.  This month we focus on Denver, Phoenix, and San Diego.  The choices are somewhat arbitrary, but designed primarily to point out how differently markets behave when you look at some of the finer details.

Compared to other markets, all three tier markets closely followed each other in Denver throughout their 24 year history.  None of the indices went above a level of 145, which means that none of the tiers saw more than 45% price appreciation from their January 2000 levels, even at their peak.  And all three tiers have roughly followed each other in the downturn. With an index level of 110.38, Denver’s low-tier market is seeing average home prices about 10% above what they were in January 2000.  The mid- and high-tiered markets are about 25% above 2000 levels. From their peak, Denver low-tiered home prices are down 20.4%, the high-tiered market and the aggregate markets are both down 12.8%.

S&P/Case-Shiller Denver Tiered Price Indices. Sources: S&P Indices and FiServ.

Phoenix’s low-tiered homes were the most responsible for the 2004-2006 run-up in home prices, but the mid- and high-tiered markets also saw some hefty gains.  At its peak, Phoenix’s low-tiered market reached a level of 239.28, the mid-tiered reached 223.28 and the high-tiered 224.01, meaning that average prices were more than 125% above their January 2000 level for all three tiered markets.  The low-tiered market, however, suffered the most on the downside. As of April 2011, Phoenix’s low-tiered home prices are down 70.4%, the mid-tiered are down 59.1%, the high-tiered down 49.8%, and the aggregate market down 55.9%, from their relative peaks.  On a peak-to-current basis, the aggregate Phoenix market is the second worst performer – Las Vegas is down 58.9%. 

S&P/Case-Shiller Phoenix Tiered Price Indices. Sources: S&P Indices and Fiserv

 San Diego’s low-tiered homes were the most responsible for the run-up in home prices in its market, but did not witness as severe a decline as Phoenix.  At their peak, San Diego’s low-tiered market saw a level of 296.81, so average prices were almost 200% above their January 2000 level.  The high-tiered market peaked about 125% above 2000; very similar to Phoenix.  From their peak, low-tiered homes are down 47.3% in San Diego, the high-tiered market is down 31.6%, and the aggregate market is down 38.3%.  And all three tiered markets are still more than 50% above their 2000 levels. In April 2011, the low-tiered market level for San Diego was 156.32, or 56% above its January 2000 level; whereas in Phoenix it was only 70.75, which is about 30% below January 2000.

S&P/Case-Shiller San Diego Tiered Price Indices. Sources: S&P Indices and FiServ.

The posts on this blog are opinions, not advice.
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