By popular request, here is a version of yesterday’s graph that includes all 20 cities tracked by Case-Shiller, with no time-shifting monkey business going on. Click the image for a super-sized version.
When I look at the graph, I see that Seattle and Portland—for whatever reason—seem to have arrived at the appreciation-spike party late, and are therefore (as one would logically expect to follow) late to see declines. The reason I time-shift the graphs I usually place up here is simply to provide a visual of just how strong the delayed correlation seems to be.
The real winner here appears to be Charlotte, NC, where they rode out the wild years of ‘04-’05 with healthy 3-5% appreciation, and now appear to be experiencing increasing appreciation, in the 7-8% range. If any of the Case-Shiller tracked cities are “bucking the trend,” it’s Charlotte, not Seattle (or Portland). Better get in on the Charlotte housing bubble now, before you’re priced out forever!
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13 responses so far ↓
1
Angie
// Aug 31, 2007 at 8:10 am
Thanks for the update, Tim. It looks like Dallas and Atlanta are chugging right along like they have been for the last few years, too.
I took a quick peek at the web site you linked at the last–pretty funny. But the fact is that in some places in the US all but the very rich have been priced out forever!–NYC, coastal southern California, San Francisco, etc, etc. It’s been that way for a long time…but it wasn’t always that way. At some point whatever factors converge, demand forever exceeds supply, and the rest is history.
2
johnyboy
// Aug 31, 2007 at 8:40 am
I grew up in Charlotte and can tell you that it is no winner. It is a horrible place. Seattle and Portland are the long term winners and from the looks of the graph, it doesnt appear that they are heading negative -
Bottoming out at 3-5% Appreciation looks realistic at this point.
3
Marc
// Aug 31, 2007 at 9:30 am
I agree with johnyboy and doubt that the market here will tank. I mean Vegas had what, 53% price appreciation from July-Oct. 2003 to 2004, and then started down a massive slide (and that was on top of a 13% increase the year before). Well of course it did, you can’t print money that fast. But, they haven’t even reached -10% yet according to this chart. So why would Seattle’s curve fall as dramatically? As I suspected, this time-shift-free chart suggests Seattle appreciation will come back to earth and remain in a relatively modest range for awhile. That is, until the rents catch up and make mortgage payments look more affordable.
As for Dallas chugging right along, I lived there and I doubt they will ever have significant price appreciation because they can’t stop building new houses. Seriously, the Dallas-Fort Worth metro area goes on forever with new subdivision after new subdivision after new subdivision. Demand there can’t keep up with the supply of cheap labor, cheaper land, and endless highways to move people to and fro.
4
Marc
// Aug 31, 2007 at 10:28 am
What, no snide remarks from the doomsayers?
Could it be that the latest Case-Shiller report coupled with the OFHEO quarter over quarter increase of 9.1% for Washington state have tempered the Bubble-ites negativity?
Don’t give up hope, I’d bet money the data for August will be horrific, if only because of the psychological effect of negative national news coverage.
5
Sen
// Aug 31, 2007 at 12:58 pm
Regarding Angie’s comment that in many cities people are “priced out forever,” in San Francisco as late as 1996 big ads read “Why rent when you can buy?” because the monthly mortgage payment was about the same as rental. In the last 10 years the majority of people have learned to see housing as an investment. As the current downturn gets worse though, more people will realize that a house is not necessarily a good investment. In the bubbly cities houses will remain unaffordable for years, but that may change.
Now in SF there is an ad that says “Why buy when you can rent?” It’s run by Blockbuster video. A clever inside joke.
As for Seattle, I do think it’ll go down starting the middle of next year. Seattle’s upturn has been more gradual than many bubbly cities, and historically it tends to be less volatile than LA or San Diego. But Seattle is very overpriced compared to historical trend.
According to John Burns consulting firm that sells data to developers, it is the 3rd most overpriced in the country, after LA and SF. It is also at risk for oversupply. Its economy is strong though, so how it’ll fare remains to be seen.
6
biliruben
// Aug 31, 2007 at 3:14 pm
I periodically make this offer when the RE cheerleaders show up, but not takers as of yet.
Anyone who wants to buy my house from me at the Zillow price and rent it back to me using a 3 year lease period, with my rental payment equaling my current PITI, email me.
You get a guaranteed quality renter and all that gobs of appreciation coming down the pipes to boot!
Put your money where your mouth is.
7
B&W Nikes
// Aug 31, 2007 at 4:41 pm
Is there a ten year graph available that shows 1997-2007? Five years is nice, but running it from 2002 only illustrates post dot bomb, 9/11, and early 21st century recession recovery data. Rather optimistic.
8
Angie
// Sep 1, 2007 at 8:28 am
Sen, your comment only reflects that renting in SF is extremely expensive, too.
For people who can afford to rent a house or sizeable flat, buying in SF may be possible. Most people I ever knew who lived in the city of San Francisco lived in converted-garage studios or shared chopped-up Victorian. These were by and large well-paid Stanford grads, FWIW.
Don’t forget that SF is the home of the half-million collapsible fixer.
9
Sen
// Sep 1, 2007 at 1:05 pm
Angie,
I was talking about San Francisco in the 1990s.
10
rose-colored-coolaid
// Sep 1, 2007 at 4:35 pm
Thank Goodness. I was worried we would never get any proof that people could be priced out forever, but this thread contains the proof!
FWIW, if housing every truly reaches a ‘permanently high plateau’, rent must move up towards it’s normal ratio(for landlords to profit), which will force employees to demand larger salaries or leave the area. So either people leave, or they make a lot more money. Either way, your affordability problem is largely solved. These people are hurt by our tax code, because their $150k salary in NYC is taxed higher than the $75k salary in Seattle, but it all works out.
11
Angie
// Sep 1, 2007 at 9:10 pm
Sen, it was just as true then as it is today.
I went to school on the peninsula shortly before the dot-coms ruled the land. I remember when little nothin’-special houses adjacent to the Stanford campus cost $250K (which, at the time, I considered a king’s ransom). Housing prices in SF were at least a factor of 1.5 or 2 higher–the equivalent house in the Sunset would have been approaching $400K, say, in the early-mid 90s.
Now you can hardly look at a house in Palo Alto for under a million, and it ain’t like the city of San Francisco has gotten any cheaper in that time, either.
There are plenty of high earners in San Francisco now, as ever. 96 and 97 were the start of the dot-com boom, when the concept of owning real estate first began to dawn on a generation of suddenly-rich young people. Maybe you were lucky enough to be among them. For we mere mortals who missed the gravy train, the idea of buying in San Francisco has always been out of the picture.
It’s funny that we’re discussing San Francisco, because having spent my formative young-adult years on the Peninsula sort of inoculated me against the shock of rising real estate prices in Seattle. Every time my husband says, “I can’t believe houses are this expensive,” I say, “It can get worse.” And it does.
We’re landlocked like SF and the weather is arguably better. The local economy has diversified enough to keep the town afloat consistently. I’ve long thought that the prices here are headed into San Franciso territory–out of reach of the average Jane and Joe once and for all. Priced out forever!
12
Angie
// Sep 1, 2007 at 9:21 pm
FWIW, if housing every truly reaches a ‘permanently high plateau’, rent must move up towards it’s normal ratio(for landlords to profit), which will force employees to demand larger salaries or leave the area. So either people leave, or they make a lot more money. Either way, your affordability problem is largely solved.
Wow, you have been at the cool-aid, haven’t you?
Not all employees have the clout to demand higher salaries, or at least salaries high enough to make housing affordable in sky-high expensive areas.
Popular options when one can’t leave or make more money include: commuting long distances to one’s job from an affordable area; living in crowded conditions and splitting the cost of housing with other people; getting government assistance to pay for housing; and giving up housing altogether and sleeping in one’s car, or out in the open.
If you need proof of any of those things, I invite you to check out I-5 or the bridges during rush hour; peruse the shared housing ads on Craigslist; attempt to get on the waitlist for subsidized housing (as far as I know the waitlist was closed a few years ago since it was so long, and has not yet reopened); or volunteer at the Union Gospel Mission or similar charity.
13
David
// Sep 4, 2007 at 1:57 pm
I live in Portland and to be honest am a bit nervous about the impact of the housing bubble. Portland has a really fragile economy, most of which has been fueled by the housing / loan bubble….with California tanking and tightening credit standards — Portland will get crushed…Seattle might not, but Portland does not have a lot going for it…aside from outsiders moving in…
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