Author – Llad Phillips

A monthly housing price index for the USA is available at the Federal Housing Finance Agency, http://www.fhfa.gov/Default.aspx?Page=14. The series illustrated is seasonally adjusted. The Case-Shiller monthly home price index, seasonally adjusted, for ten metropolitan statistical areas (MSA’s) is shown for comparison. It was obtained from MacroMarkets. http://www.macromarkets.com/csi_housing/sp_caseshiller.asp. These two home price indices are illustrated in the graph below. The shaded areas in this plot are the recessions, with the timing determined by the National Bureau of Economic Research.

Note that the housing price indices peaked before the onset of the Great recession.

Case-Shiller home price indices for the Las Vegas and Los Angeles SMA’s are illustrated along with the Case-Shiller index for ten SMA’s. All three indices are seasonally adjusted and were obtained from MacroMarkets, The shaded areas in this plot are the recessions, with the timing determined by the National Bureau of Economic Research.

Note that Los Angeles home prices rose more than prices in Las Vegas but have fallen less.

Quarterly housing price indices for various states are available at the Federal Housing Finance Agency. The following graph compares this seasonally adjusted price data for three states, California, Arizona, and Nevada. Home prices in Arizona increased the most and fell the least

Monthly data for median home price for single family units is available from the California Association of Realtors for California and the city of Santa Barbara and is maintained by the UCSB Economic Forecast Project. This data is not seasonally adjusted.

Single-family unit median prices rose dramatically for Santa Barbara and fell spectacularly in the midst of the Great Recession. However. There may be a composition effect if sales during the Great Recession were disproportionately by the less affluent, with lower wealth and less expensive homes.

Foreclosure are available from DataQuick and are maintained by the UCSB Economic Forecast Project.. The next plot compares the patterns over time of the median home price for single-family units and foreclosures for the city of Santa Barbara. Note that the number of foreclosures increased before and during the Great Recession and have not yet declined to the low levels around the turn of the century. Also, foreclosures in Santa Barbara were high following the 1990-91 recession and took at least seven years to decline to low levels.

Statistical analysis indicates that median prices for single-family units in Santa Barbara indeed are adversely affected by foreclosures with about a six month lag. Each foreclosure drops the median price by about $4,030. Currently, foreclosures are averaging about twelve to thirteen per month, so this lowers the median housing price about $48,400. The Great Recession caused about a $341,000 drop in this median price. Whether this will be a lasting effect, or reflects the long period of half a dozen years or so for foreclosures to recover, as was the case after the 1990-91 recession, remains to be seen. So together, the impact of foreclosures and the Great Recession is to drop the median single-family unit home price by about $389,400. Single family unit prices peaked at $886,700 in Santa Barbara and at the end of 2010 were $420,000, a drop of  $466,720, much of it accounted for by the impact of conditions as proxied by foreclosures and the Great Recession.

The forecast of the median single family unit housing price for Santa Barbara for the twelve months of 2011 is shown in the graph below. It is likely that housing price will remain in the current range as long as foreclosures and the aftermath of the great recession persist.

Similar results were found for Los Angeles except the impact of the Great Recession on the price of single family units was a couple of months earlier and less dramatic than for Santa Barbara. The impact of foreclosures on price occurred with a seven to eight month lag, but of course there were many more foreclosures in Los Angeles. The combined effect of the Great Recession and foreclosures on single family unit prices was $46,000, much less than for Santa Barbara.

Results closer to those for Santa Barbara were found for Monterey.  The impact of the Great recession was $282,000. Foreclosures had an immediate impact and also an impact with an eight month lag, with a resulting drop in single family unit prices of $23,100 per foreclosure. Foreclosures in Monterey are currently averaging about 7. The total impact of the Great Recession and foreclosures was a drop in price of $424,000. Current prices are off their peak in Monterey by about $555,000.

Future topics for investigation include investigating the relationship between home prices and sales as well as foreclosures.

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