October Case-Shiller: Seattle’s Slide Picks Up Steam

The October data from from Case-Shiller has been released, showing that Seattle remained one of only three markets to have positive year over year returns (in addition to Portland and Charlotte), while posting it’s third straight month of declining real estate values:

Down 0.94% between September and October.
– Up 3.30% YOY.

We now have seen a full quarter of declines which has scrubbed 1.27% off the index. This is a fairly small decline, but to put it in perspective it is a bigger three month loss than any period since October-December 1991 – when the index declined 1.94% as part of a six month slump. With the NWMLS numbers already in for November (-0.5% for the year), it seems unlikely we have reached the end of the trend at this point.

Frankly, the C-S data comes out so far in arrears that I can’t see how it is news to anyone at this point that the downward trend in home prices is continuing. What is interesting to me is that the trend is clearly universal at this point. Month over month changes were negative for every city tracked by the index, for the second straight month.

More worrisome is that both the 10 and 20 city indexes show that the downward trend appears to still be accelerating. This can be seen in this chart, lifted from the Standard & Poors press release:

Case-Shiller 10 and 20 City Indices
Click to enlarge

I am skipping Tim’s usual graph (with L.A. & San Diego offset from Seattle & Portland by 17 months) because I can’t figure out how to show two horizontal axes, but here’s an update of the other graph with all 20 Case-Shiller-tracked cities, with no time-shifting.

Case-Shiller - All Cities
Click to enlarge

82 comments:

  1. 1
    Jonny says:

    Quick, everyone, move to Charlotte!

  2. 2
    Markus says:

    I’m color blind; is that Cleveland on the bottom? It looks like they never had a bubble and are on a slight downward trend.

  3. 3
    Ubersalad says:

    You lose. There is no bubble here, Seattle is special!

  4. 4
    Nick says:

    With the decline of the US Dollar, I would love to see this chart for Seattle and the nation adjusted for inflation. (Perhaps we already are at a 0% YOY or lower if you factor this in.) My analysis is that we have two big problems on our hands. The two big problems: Sub prime, and inflation. With inflation becoming a large problem, the declining value of homes becomes even more dramatic. The analogy may be that it is a perfect storm with both these problems. At any rate, 2008 shall be interesting.

  5. 5
    vboring says:

    nick, don’t forget the feedback that inflation has on interest rates. if banks expect higher inflation, they charge higher interest rates to borrow money.

    this is a pain for the Fed.

    if they lower interest rates and increase inflation, mortgage interest rates will rise

    and if they raise interest rates, mortgage rates will increase

    either way, housing affordability will decline and ARM rates will increase, leading to larger numbers of foreclosures, leading to declining property values, leading to more conservative lending practices, leading to lower affordability.

    i think the Fed will choose the route of inflation, but it won’t work.

  6. 6
    economist says:

    if banks expect higher inflation, they charge higher interest rates to borrow money.

    Banks are hurt by inflation because their deposits are shorter term than their loans. They have to pay the depositors more but they are stuck with a bunch of fixed rate loans that they can’t raise the rate on. So of course if they anticipate inflation they will raise the spread between deposit and loan rates. We are seeing this already.

  7. 7
    John says:

    The Fed will lower rates to zero, inflation be damned. Can you imagine Bernanke telling all the f**ked homeowners, “I know you guys are tapped out but hey, we are still going to raise your mortgage payments”? No way, no how.

  8. 8
    vboring says:

    most ARMs are the prime rate + fudge, not the Fed rate.

    The Fed loans money to investment banks. Banks participate in a market to set prime rates.

    prime rate = Fed fund rate + bank profit requirements

    bank profit requirements = expected inflation over the term of the loan + fudge

    a decline in the Fed fund rate can increase inflation.

    the Fed does not control prime rates, so it can’t directly save holders of ARMs

    the Fed does not control prime rates. prime rates are set by a market.

  9. 9
    vboring says:

    that being said, i agree that the Fed will continue to lower the reserve rate as joblessness claims rise.

    but this will lead to higher prime rates as the banks will expect faster inflation.

  10. 10
    Bits of Real Panther says:

    These inflation scenarios might occur if the economy avoids recession and plods along at 1-2% growth for a few quarters but if the Bears are right and a deep recession is around the corner inflation will not be an issue, there will be much bigger problems (increasing joblessness, homelessness, crime, etc…)

  11. 11
    Pondscum says:

    Isn’t Case-Shiller inflation adjusted?

  12. 12
    MacAttack says:

    Looks like a big sawtooth… so if the past predicts the future, we’d be near the bottom about now. Anyone think that’s the case? I guess I’d need to see 75-100 years of it to see if the sawtooth pattern is regular.

  13. 13
    deejayoh says:

    I am pretty certain it is nominal.

    “deflating” the index is a pretty trivial exercise if you are so inclined. here’s the CPI data.
    ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

  14. 14
    sandy says:

    This is probably the wrong area to post this question, but I am hoping to find an answer: My friend who just bought a home in the summer was asked by her neighbor if she wanted to share the cost of the fence between their properties. She said it was a good idea, but told them she probably would hold off on the fence to make other improvements to her home (remodel floor, lights, sit out area in yard, retaining wall ….big list !etc). The neighbor responded saying she was ok, and would wait until the next summer at which point she will not want to put it off any futher. Now, my friend responds saying will try, dont want to promise given our priorities & expenses, please go ahead and install it if you feel its a priority for you. Now her neighbor quoted the following to her and indicated its required by law to for her to pay when she installs the fence.

    Quoting Partition Fences in Washington

    16.60.020 Partition fence — Reimbursement.
    When any fence has been, or shall hereafter be, erected by any person on the boundary line of his land and the person owning land adjoining thereto shall make, or cause to be made, an inclosure, so that such fence may also answer the purpose of inclosing his ground, he shall pay the owner of such fence already erected one-half of the value of so much thereof as serves for a partition fence between them: PROVIDED, That in case such fence has woven wire or other material known as hog fencing, then the adjoining owner shall not be required to pay the extra cost of such hog fencing over and above the cost of erecting a lawful fence, as by law defined, unless such adjoining owner has his land fenced with hog fencing and uses the partition fence to make a hog enclosure of his land, then he shall pay to the one who owns said hog fence one-half of the value thereof.
    [1907 c 13 § 1; Code 1881 § 2491; 1873 p 448 § 4; 1871 p 65 § 4; 1869 p 324 § 4; RRS § 5444.]

    16.60.030 Partition fence — Erection — Notice.
    When two or more persons own land adjoining which is inclosed by one fence, and it becomes necessary for the protection of the interest of one party said partition fence should be made between them, the other or others, when notified thereof, shall erect or cause to be erected one-half of such partition fence, said fence to be erected on, or as near as practicable, the line of said land.
    [Code 1881 § 2492; 1873 p 448 § 5; 1871 p 65 § 5; 1869 p 325 § 5; RRS § 5445.]

    16.60.040 Partition fence — Failure to build — Recovery of half of cost.
    If, after notice has been given by either party and a reasonable length of time has elapsed, the other party neglect or refuse to erect or cause to be erected, the one-half of such fence, the party giving notice may proceed to erect or cause to be erected the entire partition fence, and collect by law one-half of the cost thereof from the other party.
    [Code 1881 § 2493; 1873 p 448 § 6; 1871 p 65 § 6; 1869 p 325 § 6; RRS § 5446.]

    She also indicated that she wanted to install it now, and was being nice by waiting 4 to 6 months. In an earlier conversation, the neighbor and my friend couldnt agree on where the fence should end (how far along it should go from back to front), but my friend waved it away saying they would cross that bridge when they came to it. My friend who received this note just before xmas was rather miffed with the unneighborly gesture.

    My friend and her neighbor are in redmond, king county. My questions for you are 1) Per our research this law should apply to folks who have cattle on their property and not urban residents. Is this correct? 2) Is it actually required by law for residents in king county to share fences built on the property line? what is ur best advice for my friend?

  15. 15
    TJ_98370 says:

    We may not really care about future real estate prices if this crap keeps up. The middle east is a political / economic powder keg!

    Bhutto’s assassination may plunge Pakistan into more peril

  16. 16
    economist says:

    The Fed will lower rates to zero, inflation be damned

    And just who is going to keep loaning the US that $2 billion+ a day it needs to pay the bills at 0% ?

  17. 17
    David McManus says:

    Regarding the partition fence…..

    Ok, so what happens if one person doesn’t want a fence at all?

    I ran into a similar situation when I moved into my current house. My neighbor closed about a week before I did and was already setting the posts on the fence between our two houses when he showed. I said cool, free fence. I even offered to give him a hand with the labor but he refused. Now the kicker…. he built it 4 inches over my property line….so legally, and I spoke to an attorney about this, I can get him to tear the fence down since it is on my property. However, in actuality what will happen is I will simply file a notice in about a year or so that states he does not get to take possession of the land he has built on….that whole 7 years law….

  18. 18
    Kime says:

    “Looks like a big sawtooth… so if the past predicts the future, we’d be near the bottom about now. Anyone think that’s the case?”

    It depends on what you mean by the bottom: the bottom of the “tooth” or the bottom of the price decline? There was mostly negative appreciation for 2 and a half years after the bottom of the “tooth”, so if we were at the bottom of the “tooth” now I would not expect selling prices to hit bottom for at least a couple of years.

    Since the sawtooth went higher at the top this time it wouldn’t be surprising if the bottom of the “tooth” went lower so we may not even be to the bottom of the “tooth” yet.

  19. 19

    sandy,
    I’m no attorney but I always thought that there were very few laws regarding residential fence disputes. I’d suggest calling the King County Dispute Resolution Center. From what I understand it’s free (taxpayer supported)and their purpose is to prevent things from escalating.
    Call them at 206-443-9603 ext 1.

  20. 20
    Markor says:

    what is ur best advice for my friend?

    My advice is that your friend forget about the unneighborly act and pay for half of any basic fence that is installed on her property line. Her neighbor was neighborly enough when she agreed to wait for months. I think your friend should have made the fence a higher priority than other unnecessary improvements. Her “will try, dont want to promise given our priorities & expenses, please go ahead and install it if you feel its a priority for you” sounds to me just like “go ahead and pay for all of the fence I will share the benefit from, and you will probably never see a dime from me”.

  21. 21
    RG says:

    Sandy,

    Neither of those laws apply to your friend.

    6.60.020 Partition fence — Reimbursement.
    This basically says that if your friend’s neighbor makes a fence around their land, and your friend then uses a shared portion of that fence to build a fence around her land, she will have to reimburse half the cost of the shared fence. If your friend doesn’t build a fence around her property, she doesn’t have to pay anything.

    16.60.030 Partition fence — Erection — Notice.

    This basically says that if both your friend and her neighbor have a single fence around both their properties, and that the two parcels must now be separated by an intervening fence for the protection of either party’s interests (wandering cattle, say), then both must share the cost of the intervening fence. For this to apply, both parcels of land must be surrounded by one fence AND the intervening new fence must be needed for protection of one of the party’s interests.

    16.60.040 Partition fence — Failure to build — Recovery of half of cost.

    This only applies if one of the first two laws has been met and your friend fails to pay.

    I’m sure a lawyer will confirm these interpretations. I’d tell your friend to sit tight on any reimbursement if she has no intent of building a fence around her own property.

  22. 22
    Markor says:

    Ok, so what happens if one person doesn’t want a fence at all?

    Surely my neighbor likes having no fence between our houses, so his dog can poop in my yard every day.

    Often it’s obvious there should be a fence. The more urban, the more likely.

  23. 23
    Markor says:

    This basically says that if your friend’s neighbor makes a fence around their land, and your friend then uses a shared portion of that fence to build a fence around her land, she will have to reimburse half the cost of the shared fence. If your friend doesn’t build a fence around her property, she doesn’t have to pay anything.

    That makes sense. Sounds like more info on the fence is needed.

  24. 24
    David McManus says:


    #
    Markor said,

    on December 27th, 2007 at 1:30 pm

    Ok, so what happens if one person doesn’t want a fence at all?

    Surely my neighbor likes having no fence between our houses, so his dog can poop in my yard every day.

    Often it’s obvious there should be a fence. The more urban, the more likely.

    Yeah, I can see how that applies especially if you DON’T HAVE DOGS.

  25. 25
    deejayoh says:

    economist said,
    The Fed will lower rates to zero, inflation be damned

    And just who is going to keep loaning the US that $2 billion+ a day it needs to pay the bills at 0% ?

    Well, the fed will be borrowing long at 5-8% and lending short at 0%. Sounds like a new business model to me! Like selling dollars for $0.99. Make it up on volume

  26. 26
    vboring says:

    as for unemployment, i read an interesting idea today. the first wave of jobs lost from the RE downturn did not show up in the stats because most RE agents and construction workers are contract workers, not salaried, so they do not file for unemployment benefits.

    additionally, there may be many informal (illegal) workers in the industry for whom there are no stats.

    the relatively low initial jobless claims have been bothering me, but now they make sense.

  27. 27
    sandy says:

    I guess my friend understands its normal for neighbors to share the fence cost, as long as they can agree on the material, how/where it must be installed etc. In reality those are small things and can be worked out i guess. My friends basic question is this: Is is required by law for her to participate in the fence construction and share the cost?

  28. 28
    sandy says:

    Makor, IMHO I would refrain from commenting on necessary/unnecessary improvements that my friend may be undertaking. People have their own view of their priorities and they entirely entilted to have a different opinion. And its possible that to them something might be more important than what it seems to you/us. The key question here is one of timeline. The neighbors cant seem to agree that fence construction is of equal urgency/priority to them. The question is what should they do now.

  29. 29
    vboring says:

    regarding the weird fence question,

    the law only matters if the neighbor is likely to sue for compensation.

    otherwise, it is a matter of being on good terms with the neighbor.

    if i were in her shoes and wanted a fence, i’d offer to pay half of the shared fenceline cost as long as i got a design i wanted.

    if i didn’t want a fence, i’d tell them that the law is clearly for agricultural properties and that the compensation they would be granted would be nothing or the least cost for a functional fence, which is approximately equal to beans.

    if i really didn’t want a fence, i’d explain to them why i don’t want it and search for legal grounds for how i could oppose it.

  30. 30
    EconE says:

    Markor said…

    My advice is that your friend forget about the unneighborly act and pay for half of any basic fence that is installed on her property line. Her neighbor was neighborly enough when she agreed to wait for months. I think your friend should have made the fence a higher priority than other unnecessary improvements. Her “will try, dont want to promise given our priorities & expenses, please go ahead and install it if you feel its a priority for you” sounds to me just like “go ahead and pay for all of the fence I will share the benefit from, and you will probably never see a dime from me”.

    BINGO.

  31. 31
    Marc says:

    David McManus,

    While I can’t give specific legal advice on your situation, I would caution you that merely sending a written notice that the neighbor “now has your permission” to maintain the fence he previously built on your property “might not” be sufficient to defeat the neighbor’s adverse claim if the fence is allowed to stand for the statutory period. Likewise, demanding that he remove the fence but never taking affirmative steps to actually have the fence moved could also “potentially” result in the neighbor acquiring title to the 4 inch wide portion of your property.

    Applying legal doctrines like adverse possession and boundary by acquiescence to a given situation is seldom black and white because they are so fact dependent. The last thing you want is for a man in a black robe or 12 tried and true to decide the issue for you.

    Marc

  32. 32
    sandy says:

    EconE, not quite. When my friend decides to fence her property if she uses the common fence to enclose her property fully ie. build gates etc, she will pay half of it to her neighbor. The question is one of timing/circumstances of when the payment is due – i.e. does it have to be paid for when one of them wants the fence versus can be paid for when used by the other.

  33. 33
    Markor says:

    Makor, IMHO I would refrain from commenting on necessary/unnecessary improvements that my friend may be undertaking. People have their own view of their priorities and they entirely entilted to have a different opinion.

    RG interpreted the law above. I think it makes common sense and it’s fair. Peoples’ priorities are moot in the face of the law. Does your friend already have a fence around her property, except for this new section of fence in question? If not then it seems she’s off the hook, legally speaking, and should could explain the fairness of that to her neighbor.

  34. 34
    Markor says:

    When my friend decides to fence her property if she uses the common fence to enclose her property fully ie. build gates etc, she will pay half of it to her neighbor. The question is one of timing/circumstances of when the payment is due – i.e. does it have to be paid for when one of them wants the fence versus can be paid for when used by the other.

    The way the law reads above, she wouldn’t need to pay until she encloses her property.

  35. 35
    jon says:

    “Now, my friend responds saying will try, dont want to promise given our priorities & expenses, please go ahead and install it if you feel its a priority for you.”

    Regardless if the law, that sounds borderline like “if it is important for you then go ahead now and I’ll pay half like we previously agreed.”

    It could turn into a he said she said thing about a verbal agreement.

  36. 36
    David McManus says:


    #
    Marc said,

    on December 27th, 2007 at 2:50 pm

    David McManus,

    While I can’t give specific legal advice on your situation, I would caution you that merely sending a written notice that the neighbor “now has your permission” to maintain the fence he previously built on your property “might not” be sufficient to defeat the neighbor’s adverse claim if the fence is allowed to stand for the statutory period. Likewise, demanding that he remove the fence but never taking affirmative steps to actually have the fence moved could also “potentially” result in the neighbor acquiring title to the 4 inch wide portion of your property.

    Applying legal doctrines like adverse possession and boundary by acquiescence to a given situation is seldom black and white because they are so fact dependent. The last thing you want is for a man in a black robe or 12 tried and true to decide the issue for you.

    Marc

    Marc,

    As I said in my post, my ATTORNEY will be filing such motion in 2008, well under the statutory 7 years.

    -DM

  37. 37
    pondhawk says:

    It looks like the year-over-year changes for Seattle and Portland have been dropping like a rock starting around Dec-05 in Seattle and Mar-06 in Portland.

    At the present rate of change, Seattle and Portland will probably show negative year-over-year changes in the CSI starting around Mar-08 and Dec-07 respectively.

  38. 38
    S-Crow says:

    The beauty of blogs. Seems like Sandy’s question was answered here in spades vs over at RCG. I installed about 1200+ lineal ft of fencing this spring, summer and fall. Lots of clay and hardpan folks, so yes it took a long time. Anyway, my neighbor to the east has something like 30 acres of clear land and has had a history of cattle. My neighbor to the west has about 2 acres. What did I do? Spoke with both neighbors in person, walked the existing fence lines with them both, told them my intentions, what it was for (to herd my three kids) and said this is what I’m getting as far as fencing. My bill. I didn’t ask for anything because as this point the enjoyment is all mine. Plus they got to enjoy laughing at me through their kitchen windows while I toiled away. Take-away: good neighbor relations is paramount and keeping each other in the loop is critical.

    And now back to Case Shiller…..

  39. 39
    Ron says:

    “the relatively low initial jobless claims have been bothering me, but now they make sense”.

    Are you f’n serious? You are sick and need to see a psychiatrist! Enough said!

  40. 40
    economist says:

    Well, the fed will be borrowing long at 5-8% and lending short at 0%. Sounds like a new business model to me!

    Well the Fed doesn’t borrow, it creates money out of nothing, but that’s beside the point.

    The US has current account deficit of 6% of GDP. That’s how much the US has to borrow from foreigners every year because it spends more than it earns. There is simply no way foreigners will loan money to the US in a declining currency for 0%. That’s totally nonsensical.

    In fact, Americans won’t loan at 0% either. They will just put their money in gold or some other currency.

    What you are talking about is the destruction of the USD, Zimbabwe-style. That means the end of major power status for the US, and I don’t think any of the PTB want to see that any time soon.

  41. 41

    judging by the conversation so far… doesn’t look like many are shocked by the case-shiller data.

    i would be interested to see the case shiller data for the past 10, 20, 50 years (even if its just the average of a bunch of cities). The trend is your friend folks. (well maybe not the owner’s friends… but none the less).

    I also don’t like comparing this year to last year or even 3 years ago. Supply was historically the lowest it had been and there were bidding wars over my dog’s doghouse in the backyard.

    Lets see if we can look at the long term averages (longer than 10 years) and predict the reversion to the mean. (and I don’t mean the past 3 years’ averages… b/c they just weren’t normal)

    Things will likely swing a bit below the mean and then swing back up… if you’re looking for ‘the deal’, that would be the time to buy.

  42. 42
    Marc says:

    McManus,

    If your attorney is filing a “motion” that would mean you already sued your neighbor or he sued you. My advice to clients is to avoid litigation whenever possible. A friendly conversation is often a good preemptive move before sending a nasty demand letter which is, in turn, a good last step before filing suit. S-Crow’s approach was superb. However, only you know your neighbor and the dynamic you share with him or her, therefore only you are in position to choose an appropriate course of action. Best of luck.

    Marc

  43. 43
    crystalball says:

    The Case-Shiller data for Seattle and Portland suggests that the bubble burst over a year ago!

    If you look at the last 12 months of year-over-year change in the Case-Shiller Index there is a fairly linear downward trend. I used linear regression to predict what the next 12 months would be from the regression of the past 12 months.

    Based on the regression I predict that a year from now the prices in Seattle will be about 6% lower than they are today and in Portland about 9% lower than today. The trend for the composite index suggests that it would be about 15% lower than today a year from now.

    These predictions are well within the estimates of Shiller and others of a 30% decrease in prices before we see the bottom. Don’t be surprised if year-over-year changes in the northwest are increasingly negative starting in early 2008 and continuing for at least a couple of years.

    Here are the data:

    Last 12 months of year-over-year changes in the CSI (Seattle, Portland, Composite):

    Nov-06 13.00% 11.60% 1.42%
    Dec-06 12.04% 9.92% 0.22%
    Jan-07 11.14% 8.75% -0.51%
    Feb-07 10.63% 7.71% -1.30%
    Mar-07 10.02% 6.98% -1.82%
    Apr-07 9.64% 6.35% -2.69%
    May-07 9.06% 5.71% -3.40%
    Jun-07 7.94% 4.52% -3.96%
    Jul-07 6.86% 3.81% -4.37%
    Aug-07 5.66% 2.75% -4.86%
    Sep-07 4.69% 2.18% -5.50%
    Oct-07 3.30% 1.92% -6.70%

    Here are the projected next 12 months from regression of the past 12 months of year-over-year-changes (Seattle, Portland, Composite):

    Nov-07 3.26% 0.41% -7.21%
    Dec-07 2.44% -0.44% -7.88%
    Jan-08 1.59% -1.32% -8.57%
    Feb-08 0.75% -2.19% -9.26%
    Mar-08 -0.05% -3.01% -9.91%
    Apr-08 -0.89% -3.89% -10.60%
    May-08 -1.71% -4.74% -11.27%
    Jun-08 -2.56% -5.61% -11.96%
    Jul-08 -3.37% -6.46% -12.63%
    Aug-08 -4.22% -7.34% -13.32%
    Sep-08 -5.07% -8.22% -14.01%
    Oct-08 -5.91% -9.09% -14.70%

  44. 44
    wreckingbull says:

    Lets see if we can look at the long term averages (longer than 10 years) and predict the reversion to the mean. (and I don’t mean the past 3 years’ averages… b/c they just weren’t normal)

    Be careful what you ask for:

    http://patrick.net/housing/contrib/housing_projection.html

  45. 45
    David McManus says:


    McManus,

    If your attorney is filing a “motion” that would mean you already sued your neighbor or he sued you. My advice to clients is to avoid litigation whenever possible. A friendly conversation is often a good preemptive move before sending a nasty demand letter which is, in turn, a good last step before filing suit. S-Crow’s approach was superb. However, only you know your neighbor and the dynamic you share with him or her, therefore only you are in position to choose an appropriate course of action. Best of luck.

    Marc

    Ok, then forgive me for not using the proper type of language. What he told me is that it’s a simple document that simply states that my neighbors understand that I am not giving them the property that they built on and that I am also not asking them to tear the fence down. It is not a lawsuit. Would you consider closing on a house a lawsuit simply because it involves an attorney? It’s just paperwork. I have already had the discussion with my neighbor and he said “give me the papers when you’ve got em so I can sign it”. No problems whatsoever.

    This whole discussion came about just because I was curious and it was related to Sandy’s question. I still call B.S. on the fact that someone should have to pay for half of a partition fence especially if one party does not want the fence.

    On the other side of my property there is a partition fence with an easement owned by the plat (HOA). Should I then petition to get the HOA to reimburse me for half then? And by back fence butts up against property owned by the county. Should I petition the King County Council to reimburse me for half? It’s only fair right?

    I’m thinking about taking this discussion into the forums where it belongs because I think we’re veering away from the point of the original post (Case-Schiller) and the great and powerful “The Tim” will get angry.

  46. 46
    vboring says:

    Ron,

    i have never claimed to be reasonable.

    i do wonder what inspired your response, though?

    initial jobless claims are only at the borderline recession level of around 350,000 (http://calculatedrisk.blogspot.com/2007/12/weekly-unemployment-insurance-claims.html). things seem worse than that to me. the difference between my sense of things and the statistics bothered me. realizing that most of the jobs directly impacted by a RE bust wouldn’t be included in those stats cleared it up for me.

    whats so crazy about that?

  47. 47
    crystalball says:

    I agree with wreckingbull about the importance of looking at the long term to see how out of whack our bubble is.

    Shiller considered the long-term when he came up with his estimate that there should be a 30% drop in prices. According to Shiller, a 30% drop would bring us back to the long-term mean where the fundamentals support the prices.

    The regression analysis that I did is just the steep linear beginning of the falling limb of our current bubble that is also suggested by the red and blue lines on the patrick.net extrapolation of the CSI (http://patrick.net/housing/contrib/housing_projection.html).

    Here is the last 12 months of CSI data for Seattle, Portland, and the Composite:

    Nov-06 183.88 181.34 223.94
    Dec-06 183.97 180.27 222.39
    Jan-07 183.92 179.79 221.32
    Feb-07 184.85 179.90 220.47
    Mar-07 186.44 181.72 219.68
    Apr-07 188.89 183.55 218.93
    May-07 190.68 185.21 218.32
    Jun-07 191.92 185.76 217.33
    Jul-07 192.30 186.51 216.28
    Aug-07 192.14 186.00 214.58
    Sep-07 191.66 185.67 212.70
    Oct-07 189.86 185.10 209.68

    Here is what the linear regression of the last 12 months of year-over-year changes would predict the next 12 months to be for the CSI for Seattle, Portland, and the Composite:

    Nov-07 189.87 182.08 207.79
    Dec-07 188.45 179.48 204.87
    Jan-08 186.85 177.43 202.35
    Feb-08 186.23 175.96 200.05
    Mar-08 186.35 176.25 197.91
    Apr-08 187.21 176.41 195.72
    May-08 187.42 176.44 193.72
    Jun-08 187.02 175.33 191.34
    Jul-08 185.81 174.46 188.96
    Aug-08 184.03 172.35 186.00
    Sep-08 181.95 170.42 182.90
    Oct-08 178.64 168.27 178.85

  48. 48
    goin' for it says:

    vboring

    I was wondering about Ron’s post also. ;)

  49. 49
    goin' for it says:

    Deep Thoughts…..With Jack Handy

    Hi everyone, I had a bit of a lightbulb go off yesterday, inspired of course by the always insightfull comments from this forum. Please follow me on this one. This is sort of an excerpt from an email conversation I stared with a friend.

    So I had a very interesting thought just hit me. Someone on bubble was talking about how jobless claims so far are not reflecting construction workers and realtors because they’re contract workers and don’t file for unemployment.

    So I got to thinking about construction workers that are getting laid off. Then I got to thinking about whom the majority of construction workers are composed of, especially here in the Northwest…….migrant workers.

    So then I started thinking, “what happens to these people when the building industry goes completely tits up?” Do they somehow migrate into other industries? All of the fruit picking jobs in eastern washington are already locked up by the migrant workers over there. Do they just…..go home? Do they hang around and become a huge unemployed group of people? That one really scares me because this would lead to a HUGE increase in crime.
    Interesting thought, no?

    Any ideas?

  50. 50
    vboring says:

    what did they do in Las Vegas, California, and Florida?

  51. 51
    Jonny says:

    wrecking bull: that would be a good thing.

  52. 52

    goin for it-
    I’ve been unemployed for long periods. I never resorted to hitting old ladies over the head or breaking into houses. Don’t you think that illegal immigrants have a lot more to lose if they get caught?
    I would think that if the economy really went bad and jobs went way down, there would probably be a rounding up and deportation of illegals…not so much because it would be necessary but because it would be a popular symbolic gesture. We had guest workers from Mexico before, and sent them back. I would also think that if things went really bad, illegals would leave for places with healthier economies, and we’d deal with native born unemployed criminals.

  53. 53
    [troll] says:

    n th flpsd f wht gs p mst cm dwn s, wht gs dwn wll cm p!

    Ply fll t ∓ stp sttng n th fnc (.g. mstrbt t “D Tm’s” blg) !

  54. 54
    softwarengineer says:

    A NEW YEARS JOKE

    I’ve joined the Pink Pony Club and just know Seattle will weather this minor anomaly. Seattle home prices just gotta keep going up, its Newton’s Law in reverse around here after all.

    We don’t need money or a good income to buy homes in Seattle, haven’t you Bloggers tried good old balloon payment plans,then ya just wait for the wefare bailouts a comin’ soon in your neighborhood too. Meanwhile, just relax, you can easily refinance your Seattle castle with all your delicious YOY equity.

    Go out and buy yourself a $5 latte and celebrate, us Seattle homeowners are all gonna get rich….it goes on forever too….

  55. 55
    softwarengineer says:

    WE ALREADY HAD OUR MAIL BOX BUILDING BROKEN INTO AT OUR HOA

    The door was smashed open, we replaced it with a metal guard door. Was it hungry unemployed construction workers?

    They just denied Medicaid to non-citizens and that adds to the imported poverty and crime too, Jack.

    Who in this blog thinks like me and guesses the real Seattle area unemployment rate is like 20% right now?

    They’re tightening up on employers too for 2008, a shorter list of papers are needed to get a job, the SSN Match requirement is coming soon to a neighborhood near you too.

  56. 56
    David McManus says:


    #
    NostraDamnUs said,

    on December 28th, 2007 at 10:24 am

    On the flipside of what goes up must come down is, what goes down will come up!

    Play full out & stop sitting on the fence (e.g. masturbate to “Da Tim’s” blog) !

    So all you bubble blog slackers get out there and BUY, BUY, BUY!

    IT’S NEVER BEEN A BETTER TIME TO BUY!!!!!

  57. 57
    rose-colored-coolaid says:

    sandy,

    Two points. First, you’ll probably get a slightly better response if you post direct questions like this one to the forum instead of the blog. To do that, click “Forum” at the top of the page. You’ll need to create an account, but it’s quite simple.

    Second, it sounds like these fence laws do not apply to your friend at all. Your description made it sound like they wanted to run a fence from the back of their property part of the way up to the front of the property. This would be neither an enclosure nor a partition, and the law quite clearly only applies to fences of such a nature.

    Finally, to the people picking on Sandy’s friend, come on! Nobody in likes to be told what to do, and nobody likes taking money out of their pocket if it’s not a priority. If I came to you and said “I’m building a park 1/4 mile from your house. It’ll give your children a place to play, and may increase your property values. Now pay for 1/X of it (X houses in the area).” How much are you going to want to pay for that? Further, what kind of attitude is it if these neighbors have already researched laws that might force Sandy’s friend to pay up.

    My 2 cents.

  58. 58
    Marc says:

    McManus,

    Now I understand a little better: you’ve already discussed the issue with your neighbor and reached agreement in principal. I hoped that was the case. Also, you’re absolutely correct that the comments on the Case-Schiller posting have gone way off subject; in fact, I think there’s about 4 separate conversations going on.

    As for the C-S numbers, I think the majority on this blog is correct that Seattle’s C-S trend will continue downward through the rest of this year. However, I diverge in my thinking for next year. My gut feeling is that the U.S. will skate dangerously close to recession but won’t fall in. The American consumer, so routinely described as being at the end of his/her ability to continue buying more crap, will once again prove to the economic forecasters that we have not yet seen the limit of America’s willingness to buy boatloads of the developing world’s finest, lead-painted knick-knacks. And more importantly, American companies will have sold overseas an all time record amount of the stuff we’re still able to produce stateside. The current account deficit will decrease just enough to allow us to borrow en masse for another year.

    Accordingly, I predict Seattle will not experience substantial price declines in nominal dollars (substantial being the 30%-40% often predicted by certain folks on this blog). I expect a more modest change in the 2008 C-S Seattle data: a YOY decline of less than 10%, and probably around 5%. I also think it will make for an excellent buying opportunity for people like Ray Pepper, i.e., those who are in no hurry and are willing to do lots of research and make lots of low ball offers. There are and there will be plenty of diamonds in the rough if you’re willing to look hard enough. Note that my prediction is for Seattle which includes the East Side and not much else. I have little optimism for Pierce County but I will be looking for investment bargains their later in ’08 as well as Kitsap County when I see how things shake out.

  59. 59
    Kime says:

    “substantial being the 30%-40% often predicted by certain folks on this blog). I expect a more modest change in the 2008 C-S Seattle data: a YOY decline of less than 10%”

    I don’t recall anyone predicting a YOY decline of 30-40%.

  60. 60
    softwarengineer says:

    MARC, IF TODAY’S NEWS MEANS WE’LL JUST SKIRT A RECESSION, THE SKIRT MUST BE RIPPED TO SHREADS

    Note the facts, we’re buying less foreign landfill fodder than anticipated, driving our stocks down the tube….new home construction is at severe recession levels, like we’ve never hardly ever seen before. But we’ll continue to buy junk and fill our houses and landfills with it?

    Maybe we should push our cars off cliffs so we need new ones?

    http://enews.earthlink.net/article/bus?guid=20071228/477482d0_3421_1334520071228-1242026848

  61. 61
    biliruben says:

    30-40%, peak to trough, seems likely enough. Not YOY.

    I wouldn’t be exceptionally surprised to see 20% decline in some niches (say townhomes and condos) by the end of 2008, but the declines will continue for years before reaches the trough.

    20% off peak for a quality SFH will probably get me to start looking in 2009-10.

    So something listing now for 750K drops to 600K where I’m willing to buy, and eventually bottoms out at around 500K.

    I could probably live with that.

  62. 62
    goin' for it says:

    Ira,

    I don’t see the point of using yourself as an example of what a migrant, illegal, construction worker with no other marketable skills or savings does when unemployed. How about a more apples to apples comparison?

    Also, illegals have LESS to lose by committing a crime here in the states. “Oh gee golly whiz, your going to send me home now? Shucks!”

    As for them going to healthier economies…..what healthier economies? If the US is in the shits, so is everyone else.

    And as for deporting them? Holy christ!! Do you have any idea of how many of them there are around here? Deportation could be a whole new industry around here.

    I like you and your posts Ira, but, if your going to counterpoint me….

  63. 63

    Are there any statistics about the crime rate amongst illegal aliens relative to non illegals?
    I don’t think illegals come here for the culture or the coffee. It’s for work and money. Most recently the dollar is being clobbered by the euro. Yes, there are world wide recessions, but there are also times when certain economies are doing very well while others are suffering, so if that were the case ( Europe doing well, US not) would illegal immigrants stick around just in order to steal while waiting for the economy to turn around?

  64. 64
    Marc says:

    Softwarengineer,

    Recently on another posting someone called for predictions so I figured now was a good time to make mine. Feel free to point out to me a year from now if I totally blew it, was spot on, or was too big a bear. I hope for the latter, expect the second, and will admit I was wrong if the first comes to pass. Someone ought to compile everybody’s prediction for posterity’s sake.
    Not it.

  65. 65
    michael says:

    Ten years ago I had an office next to a Spanish speaking lawyer in the Pioneer Building. He specialized in capital cases involving Spanish speakers – many were illegal. He used to brag to me about how he would get his clients deported. He would tell the judge about how much it would cost to put the man in jail for murder, rape, etc. and how unfair this was to the American taxpayer. His client would get booted back to Mexico turn around and be back with in a month or two. He told me about how much he loved these racist US judges.

  66. 66
    David McManus says:

    Yes, those racist judges deporting people that ARE HERE ILLEGALLY. How rude. What do other countries do when you are there illegally?

  67. 67
    Jonny says:

    “30-40%, peak to trough, seems likely enough. Not YOY”

    yes. that’s my sense of it. YOY maybe even less than 10% decline, but i don’t think it will end for at least several years. things tend to take longer than we expect though. i’d guess 2011 as the bottom, but given the tendency for markets to drag things out, I would not be surprised if we saw stagnation and declines for even several years after that, maybe until 2015. it took a LONG time to make these enormous bad investments and it is going to take a LONG time for this to get worked out.

  68. 68
    Plissken says:

    “Who in this blog thinks like me and guesses the real Seattle area unemployment rate is like 20% right now?”

    You’ve got to be kidding. None of you people have ever lived in a country with 20% or even 15% unemployment. I have. Seattle looks nothing like that. You can still walk into a fast food joint or video store and get a job on the spot. In an environment with 10+% unemployment they ask to see your college transcripts before they let you behind the counter.

    What is your problem? Do you wish for 20% unemployment so bad that you have to pretend it’s happening?

  69. 69
    george says:

    Marc? A buying opportunity in 2008? Catch any falling knives lately?

  70. 70
    Roger says:

    I’d go downstairs to grab a soda but I don’t think the illegals are done raping my wife yet.

    Are you guys scared all the time? Capital crimes? Capital crimes, if I’m not mistaken, are aggravated first degree murder and…oh, that’s right, that’s the only actual capital crime in this state. There were, what, 250 murders in the state last year? I’d bet $100 the vast majority of them were white bread dudes like you and I, not this “vast” illegal population you’re knotting your noose about.

  71. 71
    michael says:

    I’m all for keeping illegal aliens in this country but I stand by my story. The lawyer that worked in the office next door bragged about getting illegals off all the time. He would try to get his clients deported because it was better than serving the time. Most of the crime involved other illegals in the Yakima area and a lot of those cases never go to court anyway.

    I don’t want any illegal aliens deported. As far as I’m concerned you should just hand out US passports to anyone that wants them. I think the US passport office should simply do a back ground check and hand out citizenship and I didn’t say that all illegals commit crime. I’m only repeating a story that is 100% true. The lawyer in the office next door that defended illegal aliens bragged about his ability to get them deported all the time. So before you hand yourself another Noble Peace Prize – you should read all the posts.

  72. 72
    James Antley says:

    Ira and others,

    “Don’t you think that illegal immigrants have a lot more to lose if they get caught?”

    Wrongo Keebler. It’s absolutely the opposite. An American citizen could get an arrest record, jail time, possessions confiscated, etc. for doing some minor illegal act (like bringing a butter knife in his lunchbox to school or work or running through a stop sign with one joint in the glove box).

    An illegal alien who kills a family while he is driving with 0.30 % alchohol in his bloodstream will get let off by el Presidente Jorge Bush if he has not already been deported to Mexico so that he come back across the Rio Grand next year.

    Get out a sheet of notebook paper, children. Compare and contrast.

    Yeah, I think the Mexican illegal alien has much less to lose, and there is no doubt that crime would go up in the situation surmised by Mr. Goin 4 It. However, I think many illegal aliens would go (or I should say, “are going”) home as construction work dries up, anyway.

    Back to the topic at hand. Heck no, don’t buy a house right now. Prices will go down another 40 – 50 % or so over 5 years

  73. 73
    Buceri says:

    Please change the topic. This is an educated bunch that it is starting to sound like ignorant, racist……Republicans?

    To commit crimes you stay in Mexico, where for a few pesos the police looks the other way and take you in and out of the crime scene!!!
    Please, do you think Mexicans are in the Northwest because they love the weather???
    The moment the jobs are gone they move someplace else; these hard working people need to send money back home.
    In construction?? those moved a couple of years ago to Louisiana, and here to the Southeast. These people are always moving.
    Let’s stick to Real Estate folks.

  74. 74
    James Antley says:

    Mr. Buceri,

    There is no need for name calling. I resent being called a Republican, as I am a libertarian.

    Your use of the other names, I assume, is simply your admission that I am correct and that you have no rebuttal. I am used to that. It’s a left-wing thing, I wouldn’t understand, and if I did, I’d have to commit karioki,, I mean, hari-krisna, kari, whatever.

    Mr. Buceli’s one minute-hate is now completed – back to real estate. Like I said, 40-50% decline in prices people. Wait for the price to get “real” before you buy your “estate” ha, ha, I crack myself up ….

  75. 75
    wageslave says:

    “Reality” or “Zillow-ism”? I have family that live on the outskirts of the Viewridge neighborhood (no lake view) – interestingly, according to Zillow, their home values are now increasing again as of the 12/18 update whereas it had been decreasing along with the rest of Seattle. Must’ve been some special homes that sold to life the entire neighborhood!

    Admittedly, Viewridge is one of the more desirable Seattle neighborhoods, but… really?

  76. 76
    crystalball says:

    Seattle and Portland will see a 30% reduction from their peak Jul-07 CSI probably in late 2009 to early 2010 or possibly later. This prediction is based on applying a linear regression of the last 12 months of YOY change to estimate the rate of deflation of the bubble.

    A chart showing the predicted CSI through Feb-2010 using the YOY regression is at this link

    http://i108.photobucket.com/albums/n11/gpel461/csi_oct07.gif

  77. 77
    crystalball says:

    Here are the charts of the regressions of the last 12 months of YOY change in CSI for Seattle, Portland, and the 20-city composite (SPSC20R):

    http://i251.photobucket.com/albums/gg317/bubbleblog/csi_yoy_oct07.gif

  78. 78
    deejayoh says:

    Crystalball –
    Interesting charts, but I don’t think you can really do a linear extrapolation of the current trend forward ad infinitum. At some point we’ll hit the knee in the curve. Clearly there are up and down periods over time, but it will slow. I think it’s amazing how long it has been accerating.

    For Johnnybigspenda – the seattle data for C-S only goes back to 1991. OFHEO tracks it prettly closely but only goes back to 1975. Compared to both of those, this is one of the biggest downturns Seattle MSA has ever seen – already.

  79. 79
    crystalball says:

    It is likely that the rate of deceleration would slow down at some point. That would mean it will take longer to hit the bottom than I predicted from the regressions, probably some time after early 2010.

    For example, the deceleration for the 20-city composite CSI started out at about double the current rate from Jan-06 to Oct-06 compared with Nov-06 to Oct-07. I wouldn’t be surprised if the deceleration for Seattle and Portland slowed at some point. That’s why I think that earliest we will hit bottom is early 2010 and maybe it is more likely that it will be some time after that.

    One thing that suggests that the current rate of deceleration in Seattle/Portland could continue until the YOY is deeply negative is that the current slope for Seattle and Portland is similar to the 20-city composite, which has decelerated at this rate all the way to the current -6.1% YOY change, and right now it looks like the deceleration is increasing. At the current rate the Seattle CSI will be about -6% YOY in about a year.

  80. 80
    Amarjit says:

    The predictions are amazing, but I think you can not apply linear regression to human elements and current events. Even if you apply the trends to the current situations, once the housing inventories are exausted, the trends would show upward reflections. The Seattle area population is still growing and almost swelled to million people in 2006, growing and growing …….

    Amarjit Sandhu
    http://www.500realty.net

  81. 81
    crystalball says:

    The inventory of active listings in Seattle is increasing and it is expected to continue to increase into 2008:

    http://i251.photobucket.com/albums/gg317/bubbleblog/inventory-2.gif

  82. 82
    crystalball says:

    Predicted deflation of the Seattle bubble closely tracks the observed actual deflation of the 20-city composite CSI:

    http://i251.photobucket.com/albums/gg317/bubbleblog/deflation.gif

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