You can listen to the full segment at the link above. Here’s a short excerpt from the beginning:
It seems that most of the people that called in were against a government bailout, despite the fact that both Hilary Clinton and Barack Obama would like to spend billions to do just that. I don’t like to get too much into politics on here, but I have to wonder if the democratic candidates really have their finger on the pulse of their base when so many people from a town like Seattle call in to say that they disagree with both of them.
Anyway, the program is an interesting listen. I wish I would have known about it while it was airing and could have called in.
Here’s our monthly look at Seattle’s price tiers from Case-Shiller. I’d like to start by answering a few questions about these tiers that came up last month. First, all Case-Shiller data is based on single-family homes only, no condos or townhomes. Also, the Case-Shiller definition of the “Seattle area” is King, Pierce, and Snohomish counties. Lastly, some people were wondering how the tiers are chosen. Here is the explanation from the Case-Shiller methodology pdf:
The Division of Repeat Sales Pairs into Price Tiers
For the purpose of constructing the three tier indices, price breakpoints between low-tier and middle-tier properties and price breakpoints between middle-tier and upper-tier properties are computed using all sales for each period, so that there are the same number of sales, after accounting for exclusions, in each of the three tiers. The breakpoints are smoothed through time to eliminate seasonal and other transient variation. Each repeat sale pair is then allocated to one of the three tiers depending on first sale price, resulting in a repeat sales pairs data set divided into thirds.
Now let’s move on to the graphs. First up is the straight graph of the index from January 2000 through January 2008.
While the performance of the three tiers has diverged somewhat since 2004, prices in all three tiers have retreated back to approximately August 2006.
Here’s a chart of the year-over-year change in the index from June 2002 through January 2008 (I selected that date range to match the time-shifted graph in the standard Case-Shiller posts).
Wow, the high tier really took a tumble last month, making up pretty much all the ground it had lost to the other two tiers. Now all three tiers sit at around 6% below their peaks.
So even though prices in the high tier rose the slowest and peaked the latest, right now they’re falling the fastest. It will be interesting to see if this trend continues as things unwind.
If you’re viewing this blog for the first time today because you saw me (Tim Ellis) on KING 5 News tonight, I’d like to take a moment to welcome you. Seattle Bubble is the Seattle area’s #1 resource for news, analysis, commentary, and community discussion on the local real estate market. This community site is focused on productive discussion of the local housing market, so that everyone involved can work toward a goal of improving understanding and dispelling myths.
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Here are some recent stories that may interest you if you want to know what’s going on in today’s real estate market around Seattle:
or, if you’re a number-crunching kind of person, any of the posts in the stats category
For those of you that aren’t new, and didn’t catch KING 5 news tonight, I will update this post later with the video clip. For now you can view the video on the KING 5 website here. Check back later tonight or tomorrow morning for an embedded video on this post.
Update: Here’s the video that I uploaded to YouTube:
Update 2: Neat, I found out that you can view a noticeably higher-quality version of the YouTube video by going to this link. Unfortunately I can’t seem to embed this version without it stretching it vertically. Oh well.
In a big surprise to absolutely no one, Seattle is now officially in the realm of year-to-year price declines. What a change from just one year ago, when prices were up 11.14% year-over-year. It only took six months of declines from the peak to get here. Home prices in Seattle have now declined a total of 5.55% from their July 2007 peak.
Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Despite a sharp drop down in Portland, Seattle’s YOY is still slightly worse than our neighbors to the south.
Also, here’s an interesting coincidence: The total time from peak year-over-year appreciation to year-over-year depreciation in Seattle came in at 25 months. Most cities went negative quicker than that (Detroit was the fastest at 11 months), but two cities took longer, Minneapolis and Las Vegas. One city took exactly as long as Seattle. I bet you can guess which one… San Diego. Heh.
Here’s an update to the peak-decline graph I posted last month, inspired by a graph created by reader CrystalBall. 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.
I don’t think anyone would have guessed that for the first six months on the way down, the city we would follow the closest would be Miami. Yow. But don’t anybody worry, I’m sure the bottom is in. Just like it has been for each of the last twelve consecutive months.
Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.
Speaking of the economy, here’s a headline I never expected to see in The Seattle Times, let alone above the fold on the front page of the Sunday paper:
I guess this is a surprising discovery for some people—something that is considered big news. Here are some choice excerpts from the article:
“If things get really bad, we’ll have all sorts of problems,” said Dick Startz, an economics professor at the University of Washington, who thinks a recession is still unlikely.
Michael Parks, publisher of Marple’s Pacific Northwest Letter and the dean of regional economy watchers, said, “We’re obviously not immune to what’s happening in the national and global economy. We [the nation] came awfully close to systemic failure over the weekend” of the Bear Stearns debacle.
And these are the optimists.
…
WaMu’s troubles endanger a major corporate headquarters, meaning a potential loss of large numbers of well-paid jobs and local giving. And that’s what Wall Street would consider a good outcome — a buyout, which looks unlikely. Otherwise, WaMu will be left to work out its troubles, leaving the area without the economic boost from the institution’s growth years. And if history is a guide, it will still be acquired at the end of the process.
WaMu won’t be the only part of the local backbone to suffer if the recession is prolonged.
Boeing, already stunned by the loss of the Air Force tanker program, could begin to pay a serious financial price for delays in the 787, undercutting its best selling point as fuel-efficient.
Cuts in consumer spending also could damage such leading companies as Microsoft, Amazon and Starbucks.
These companies are responsible for vast wealth creation, through everything from payrolls and the returns for their many local shareholders to their contracts with local vendors.
A continuing credit crunch will reach Washington businesses and could even influence venture capital, a key component of Seattle’s innovation machine.
All these “what ifs” might have seemed alarmist even two months ago. Not now.
Of course none of this really comes as much of a surprise to anyone that has been really paying attention to this irresponsible run-up over the last few years. Smart people like Peter Schiff and Bill Fleckenstein have seen all this coming miles away. Here’s a quote from Peter Schiff in August 2006:
The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship …I see a real financial crisis coming for the United States.
Some people seem to want to draw some sort of distinction between the impending recession and the housing bubble. That is nonsense. The housing bubble is a direct result of the credit bubble. All sorts of insane risks were taken, loans for hundreds of thousands of dollars were given to people simply because they asked, and now the consequences are finally catching up with us.
Those that say “Seattle didn’t have a housing bubble,” apparently think that the rapid, reckless expansion of credit and all the temporary benefits that came from it did not have any positive effect on Seattle’s real estate market or general economy, and therefore the inevitable retraction will have little to no negative effect here. Again, that is nonsense.
What began as the pricking of a housing bubble has spread over the past seven months into most parts of the economy. Even solid companies and municipalities have had trouble getting loans or selling bonds. The complexity of many financial instruments and the interrelationships among banks have made it difficult to root out the bad bets and keep them from contaminating the system.
The housing bust presents perhaps the most serious obstacle to recovery, according to Douglas Cliggott, chief investment officer for Dover Management. “It’s hard to have an interest rate that makes it attractive to buy an asset that’s going down,” he said.
Indeed. Amazingly, these economic realities hold true everywhere, even here in Seattle.
