California condo markets see prices falling

With the September 27th release of July 2011 data for the S&P/Case-Shiller Home Price Indices we saw further weakening in condo prices in the California metro areas. The LA index reported no change in condo prices in July versus June, and the San Francisco index fell by 1.1%.

As previously noted, this is occurring during a time of anticipated seasonal strength; and the data look worse if you view the markets over the prior 12 months. In addition to no change in July, condo prices in LA fell in 11 of the prior 12 reported months, leaving the index down 7.5% in July 2011 versus July 2010 and hitting a crisis low in July 2011. San Francisco’s condo market saw monthly declines in 10 of those months and is down 9.4% versus July 2010.  Since April 2011, the California condo markets have generally seen their annual rates of change falling, rather than improving as they generally were in Boston, Chicago and New York.

The chart below compares the index levels for the five condo markets covered by the S&P/Case-Shiller Condo Prices Indices, rebased to 1995 = 100. The blue and red lines represent Los Angeles and San Francisco, respectively. The previously noted year-long declining trend continued for these two markets in July, when the expectation is for seasonal strength in home prices. On average these market prices are back to their mid-2003 levels.

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

Looking below at July’s monthly home and condo price data, you can see that both California markets were weaker than the other three MSAs. California home prices grew by less than 0.5% in July. Condo prices fell in San Francisco and were flat in Los Angeles. Boston, Chicago and New York saw relatively healthy increases in both markets over the month.  New York condo prices were up 0.3% in July versus the same month in 2010.

S&P/Case-Shiller Condo Price Indices.

The chart below illustrates the differences between New York and Los Angeles over the past 11 years. The New York condo market was, and still is, the best relative performer coming out of the recent crisis. Comparing the green and grey lines below, you can see that the New York condo market has been largely stable over the past two years and has shown an upward trend since January 2011; whereas the Los Angeles market is still weakening.  The LA condo market has fallen by 39.0% since its July 2006 peak; whereas the New York market has only given back 13.8% from its February 2006 peak.  While peaking at different times in 2005-2007, Boston, Chicago and San Francisco have fallen by 11.3%, 28.7% and 32.9%, respectively; another indication of the relative weakness in the California condo markets.

S&P/Case-Shiller Home and Condo Price Indices for New York and Los Angeles. Sources: S&P Indices and Fiserv>

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