This is just a quick note to let everyone know that I am withdrawing Seattle Bubble from the “Blarch Badness” blog tournament. If you would like to read a more detailed statement, click below.
Entries from February 29th, 2008
Seattle Bubble Withdraws from Blog Contest
By The Tim on February 29th, 2008 at 2:15 PM · 25 Comments
→ 25 CommentsCategories: Administrative
Tags: administrative, blogging
February 29 Open Thread
By The Tim on February 29th, 2008 at 8:04 AM · 70 Comments
Here’s something that has become almost as rare as February 29: an open thread.
Post off-topic discussions, links, and basically whatever you want here.
Also, make sure to Vote for Seattle Bubble. Though with the large amount of monkey business that’s gone on so far, I won’t be surprised if everyone gets disqualified. Oh well.
[Poll Update:] Okay, I don’t know what’s going on here, but somebody seems to be picking back up where yesterday’s voting nonsense left off. Yesterday afternoon was filled with suspicious voting patterns, like 49 votes for Seattle Bubble in 15 minutes while LL only got 7, followed by 95 votes for LL in the following 15 minutes, with Seattle Bubble only getting 1, etc. Now we’ve got a sudden stream of votes pouring in for Seattle Bubble, shifting the score from Seattle Bubble down by 11 to Seattle Bubble up by 148 in a mere 45 minutes, followed by a 187-vote surge for LL in the next 15 minutes, putting it back at a virtual tie. What the heck, people?
While we all know who started the cheating in this tournament, and I honestly have no clue whether Seattle Bubble regulars are responsible for the current sudden run, I really think this is getting ridiculous. If Metroblogging Seattle doesn’t shut down this poll (which at this point I would recommend), it would appear that the winner will simply be decided by who is paying the most attention in the final hours before the contest closes at 9:00PM Monday evening.
→ 70 CommentsCategories: Open Thread
Tags: Open Thread
King County Affordability: 1950-2007
By The Tim on February 28th, 2008 at 12:06 PM · 35 Comments
When I posted last week’s 61-year home price history, I promised a follow-up on affordability. So, here it is.
Before I get to the chart, here’s a quick refresher on what the “affordability index” is, and what it isn’t. What it is is a simple measure that shows relationship between median home prices, median household incomes, and interest rates. It is calculated by determining the monthly payment (principal and interest) that would result from buying the median-priced home, assuming a 20% down payment and current interest rates on a 30-year fixed-rate mortgage, then comparing that to 30% of the monthly median household income (the standard measure of “affordable housing”). Thus, an affordability index of 100 means that the median household would pay exactly 30% of their monthly income toward the mortgage of the median-priced house. Above 100 is more affordable, while below 100 is less affordable.
The affordability index does not take into account lending standards or exotic mortgage availability. It also does not necessarily indicate that an area is overpriced if the affordability index is below 100. More desirable areas are inherently less affordable. No reasonable person would expect housing in Bismark, ND to have the same affordability index as New York, NY. What is somewhat instructive however, is comparing the affordability index of a given area to that same area’s affordability index in the past. How convenient then, that this is exactly what we are doing with this post.
What you see below is a graph of the Affordability Index for King County from 1950 through 2007. For ease of reference, I’ve overlaid the graph of inflation-adjusted home prices on the right axis, so you can see how the two relate. I want to note though, that when calculating the affordability index, actual home prices are used, not inflation-adjusted prices.
From 1950 to 1970, while home prices more or less just kept up with inflation, affordability was sky-high, reaching peaks as high as 227. Of course, it shouldn’t come as a real surprise that when home prices began to jump up in the mid ’70s, affordability dropped like a rock. Of course, home prices are only part of the equation. Affordability tanked from 1976 to 1981 not only due to a leap in home prices, but an even more extreme spike in interest rates. On the following graph you can see the other two components of the affordability index: median incomes and interest rates.
I should point out that pre-1971 interest rate data is quite difficult to find, and I was forced to make my best estimate based on a chart of 30 Year FHA Mortgage Rates. Also, I believe that sometime during the period that is displayed on the graph, the “standard” mortgage shifted from a 15-year to a 30-year term. I couldn’t locate any data on historical mortgage standards to back that up, but maybe one of our resourceful readers can. Even with the ridiculously high interest rates of the early ’80s, the long-term average of the affordability index through the ’80s and ’90s comes out to 101.9. Here are the averages for each decade since the ’50s:
- 1950s: 160.6
- 1960s: 194.6
- 1970s: 178.4
- 1980s: 97.4
- 1990s: 106.5
- 2000-2007: 89.7
The affordability index for 2007 stood at 72.5, which is 29% lower than the 1980-1999 average. To get back in line with long-term trends, the affordability index would have to increase by approximately 40%. This could happen through increasing incomes, falling home prices, or falling interest rates. Lower rates seems fairly unlikely, so I’m predicting that it will be some combination of the first two, with the emphasis on the falling home prices.
This analysis may remind you of Deejayoh’s excellent post that compared disposable income, interest rates, and home prices from 1985 through 2007. The data is slightly different, but the conclusion is largely the same. Today’s home prices are seriously out of whack with long-term trends.
Sources:
(Home Prices: see this post)
(Household Income: US Census Bureau)
(1950-1970 Interest Rates: Financial Forecast Center)
(1971-2007 Interest Rates: Federal Reserve)
→ 35 CommentsCategories: Features · Statistics
Tags: affordability, original research, roller_coaster, Statistics
Blog Contest Update: Seattle Bubble in Dead Heat
By The Tim on February 28th, 2008 at 8:48 AM · 23 Comments
Just a quick update on the blog contest that Seattle Bubble is in over at Metroblogging Seattle.
As of this post, it’s a dead heat, with Seattle Bubble trailing by one vote, 924 to 925. Many thanks to everyone who has voted so far, and special thanks to Rain City Guide and Seattle Real Estate Professionals for the plugs.
The Lookout Landing crowd seems to think that they will get a surge of votes this evening surrounding the Mariner’s first game, so we need your vote now more than ever.
If you’re reading this on a computer that displays poll options instead of poll results over on the right sidebar, then click the little bullet next to “Seattle Bubble” and click “Vote.” I’m talking to you too, RSS subscribers. Take five seconds to load either Seattle Bubble or the contest page, and vote for us.
This concludes today’s episode of “Shameless Begging.” We now return you to your regularly scheduled programming.
[Update:] Seattle Bubble has withdrawn.
→ 23 CommentsCategories: Administrative
Tags: administrative, blogging
More on Case-Shiller: Seattle Tiers
By The Tim on February 27th, 2008 at 10:49 AM · 27 Comments
A while back, Case-Shiller began releasing more detailed information for each of the twenty markets they track. Specifically, the index can now be viewed broken into three tiers: low-priced, middle-priced, and high-priced. Some readers have expressed interest in this information, so let’s take a closer look at Case-Shiller’s Seattle data.
First up is a straight graph of the index from January 2000 through December 2007.
As you can see, there’s not a huge variation here, but there is a noticable difference in the performance of the three tiers. The low tier peaked in June 2007 at 202.4, the middle tier in July at 193.8, and the high tier in August at 187.6. This means that from January 2000 to Summer 2007, the low tier gained 102%, the middle tier 94%, and the high tier 88%.
Here’s a chart of the year-over-year change in the index from June 2002 through December 2007 (I selected that date range to match the time-shifted graph in the standard Case-Shiller posts).
All three tiers experienced their peak appreciation from late 2005 to early 2006, with the low tier maxing out at 19.6% in October 2005, the middle tier reaching 19.3% in February 2006, and the high tier topping out at 17.6% in December 2005. While winter is usually the slow season for real estate, the Case-Shiller method of tracking only same-house sales tends to smooth out such seasonality. Also worth noting is the fact that the high tier is the only one that has yet to cross into YOY negative territory. December data put the low tier at -0.66% and the middle tier at -0.42%. The high tier’s +2.14% was enough to keep the aggregate index from going YOY negative yet.
Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.
Nothing too astonishing here. The low tier has been declining longest, but the high tier has been declining fastest. When we have more data as the decline drags on, this will probably prove to be more interesting.
I’m not really sure if you can draw any conclusions from this data, except to note that if the theory of “where prices rose fastest they will fall fastest” is true, the low-priced homes have further to fall, while the higher-priced homes will indeed “hold their value” better. Here’s a question for you: Do you, the readers, find this data interesting enough to merit a monthly post, or should tiered data be posted more like once a quarter?
(Home Price Indices, Standard & Poor’s, 02.26.2008)
→ 27 CommentsCategories: Statistics
Tags: Case-Shiller, Statistics
Case-Shiller: Seattle’s Trend-Bucking Days are Over
By The Tim on February 26th, 2008 at 12:17 PM · 111 Comments
Home prices in Seattle edged down again to within an inch of zero year-over-year change, according to the latest data from the Case-Shiller Home Price Index.
Down 1.21% November to December.
Up 0.49% YOY.
For those of you keeping score at home, that makes five month-to-month declines in a row. Seattle has now declined a total of 3.86% from its July 2007 peak. More on that below.
Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. You’ll notice that Seattle’s YOY performance slipped below Portland for the first time
And here’s the graph of all twenty Case-Shiller-tracked cities:
Lastly, here’s a new one for you. The concept is inspired by a reader who has posted a similar graph a couple of times. I don’t recall who specifically, so I apologize for not giving you explicit credit here. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows total months since each individual city peaked. The peaks ranged from September 2005 (Boston) to July 2007 (Portland & Seattle), so that explains why each line is a different length.
Seattle may have been late to the party, but in the six months since our market peaked, it seems to be doing its best to catch up quickly.
(Home Price Indices, Standard & Poor’s, 02.26.2008)
→ 111 CommentsCategories: Statistics
Tags: behind the cycle, Case-Shiller, Statistics
