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)
Interesting that the low-tier crossed the others in the YOY graph a few years ago. If that happens on the raw C-S Index graph things will have officially gotten ugly IMO
Sorry, meant a few months ago
dunno if anybody noticed, but interest rates are going up, despite the lower Fed Reserve rates.
it makes me wonder which is falling faster: prices or affordability
I think that this is interesting enough to merit a monthly post.
Considering that the high tier is 100% of the houses even worth considering in most of the area, it is probably more informative to look at that data alone for most folks.
Low Tier: < $319,218
Mid Tier: $319,218 – $466,645
High Tier: $ 466,645+
This is pretty much all the price changes I look at anymore, because I am looking at moving up. The total declines don’t matter to me, only the relative declines.
I’ve also looked closely at the tiers in other markets as well as the prior Seattle downturn (unfortunately the data starts right about the end of the last downturn in 1990, so not particularly useful.)
Looking at other cities with data going back farther, the low-end held up the best in many markets in the last downturn, but this pattern doesn’t seem to be holding up as well this time. My guess as to the reason for this is due to the ease of financing for first-time homebuyers as well as fraud in assessing home values. Whether you think this happened more or less in Seattle than in other places like LA and the Inland Empire is open to debate.
In any case, a detailed analysis of the tiers is extremely useful and welcome.
I also note that the low-tier is probably almost exclusively condos, townhomes and tear-downs.
very useful. your comment on upper tier holding their value can be questioned in this cycle because so many people were able to buy higher priced homes because of lax lending standards, low interest rates, no money down, etc. That is all gone, and you will need to come up with a large down payment for the expensive house, which not all have the means to do this. I think the higher tier will not hold their value better than lower and mid. All three will tumbling down. I think that you mentioned that higher tier is falling at a faster rate. This may mean that folks simply do not have 20% on an $800,000 home…
the top tier problem may be partially caused my the fact that interest rates on jumbos are higher than those for conforming by an unusually high margin.
i imagine most jumbo purchasers are moving up, so having $100k or $200k for a downpayment from the previous house sale may not be so unusual.
Monthly. I love this stuff.
“your comment on upper tier holding their value can be questioned in this cycle because so many people were able to buy higher priced homes because of lax lending standards, low interest rates, no money down, etc.”
If that’s the case, then how come the upper tier didn’t go up *as much* as the lower tiers? I think the point is that if you assume that lending standards will return to pre-bubble standards, then the high tier doesn’t have as far to go down to get to the same “affordability” as it had previously when lending standards were presumably more sane.
“i imagine most jumbo purchasers are moving up, so having $100k or $200k for a downpayment from the previous house sale may not be so unusual.”
Correct. Imagine that someone with 100K of cash/equity wants to buy a 700K house. Instead of getting a 600K Jumbo loan, this person would instead get a 417K conforming loan and a 183K HELOC at 6% (assuming good credit). The CLTV on this is 85% so the HELOC will work. (I’ve been told that it’s harder to get a HELOC for more than 85% in this area)
Because of this whole Jumbo-premium thing, lenders are coming up with more creative ways of getting people into houses. Note that if Helicopter Ben lowers rates again, that HELOC instantly goes down too. The converse is true when he ultimately starts raising rates…
Also, you can still get 95% CLTV with either mortgage insurance or an increase in rate. This may (and likely) will change a bit, but because our area is still “good” the money is still flowing, just not quite as freely as it did before.
I have a question about the tiers themselves. How are they chosen? Are 33% of all homes in each tier?
Are these tiers for seattle or the seattle “area”. If it’s the area, what does that include?
I’m interested in this data since I also plan to move up in a couple years. I think I’m hign end of mid for Kent . My house is around 380 right now (…no wait, now it’s 375 …. no wait..) which would be low end mid according to biliruben’s numbers.
Hoping to move into a mid (low mid?) in Bellevue, hence the curiosity. If your chart is for seattle only, then that is good new for me maybe, since the mids are dropping faster than the highs in the area I want to move to.
My big worry is that my house drops faster than the house I want to buy and/or mortgage rates go up. If both happen, I’m hosed!
I like this data
I too vote for having this data published monthly, as I’m looking to move up from low-tier to high-tier.
Amazing to see how many of you fellow readers want the same thing.
Btw, has anybody ever heard of someone who did a “swap” transaction? I mean:
[smallhouse + cash] [bighouse]
“If it’s the area, what does that include?”
King, Pierce and Snohomish, according to the methodology on the website. I guess I can take back my condo and townhome comment.
“King, Pierce and Snohomish, according to the methodology on the website. I guess I can take back my condo and townhome comment.”
Right.. heh. They might as well name the low tier “Pierce” the medium tier “Snohomish” and the high tier “King”.
I also find this interesting, monthly please.
Yeah, now that I think about it, I think these are all SFH.
montly! I like the data :)
Okay, I guess there’s plenty of interest, so I’ll post these every month. Is there any specific analysis or type of graph that people would like to see that isn’t already included?
To answer a few questions:
“I think these are all SFH.”
Correct. Source:
“Are these tiers for seattle or the seattle “area”. If it’s the area, what does that include?”
Answer (source):
“I have a question about the tiers themselves. How are they chosen? Are 33% of all homes in each tier?”
Answer (source):
Even though I’ve done a bit of this myself, and realizing that this is SEATTLE bubble, I would still love to see analysis of other markets who are further along in the downturn, particularly ones like SD which I think might move similarly to Seattle, to see how the tiers shape up.
It would be great to get this data stratified by prime vs. subprime, but I am sure that doesn’t exist. My guess is that much subprime had values inflated through hinky assessments, cash-back under the table and seller financed closing costs during the run-up. So when those same houses go to sell now, they will show larger declines.
Splitting out Jumbos would also be interesting when looking at the top tier.
I also would love to see just King, but you can’t have everything.
Comparing the differences between C/S and OHFEO, which only covers conforming loans, highlights that their are differences, but it would be great to know exactly what they are.
biliruben, you should check out Piggington’s Econo-Almanac. Rich Toscano does a great job of analyzing the San Diego market in serious depth. For an example, check out his latest Case-Shiller post. Much of what I present on Seattle Bubble is inspired by Rich’s work on Piggington.
Thanks, Tim. I used to go over there and read Rich all the time, but got frustrated when a lot of the good stuff went behind a pay wall.
I think condo data would be nice as well, especially since (as others have stated) the chart really only gives a single data line for most people in King County because of high SFH prices.
zillow has a cool function showing percent declined over the last 30 days for its zestimate price ranges. i don’t know whether it’s based on sales or asking price- but if it’s based on sales, very encouraging- there are 20% range drops on many current listings at least in west seattle. this seems like a great area for blog tracking, analysis and discussion- it’s very specific, nearly real-time data on the market dropping.
I’ve been saying since I moved here that it seems like prices were compressed into a smaller range. This data supports that.
My two cents – I wouldn’t mind seeing the 1st and 3rd plots tied to the usual monthly C-S post. The 2nd is a bit redundant.
[...] a detailed breakdown of high-tier home prices in Seattle, showing that the value of the most expensive homes grew more slowly than less expensive homes, but [...]