Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

31 responses to “Case-Shiller Tiers: Low Tier Barely Bounces”

  1. AMS

    “This graph really makes it easy to see how little the low end was bumped up in April.”

    It looks like the low end didn’t bump up much…

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  2. alex

    Did you notice that up to Apr/2004, the chart is more or less a straight line? If you were to project that straight line up to today, it would lead to an index of about 150 (as opposed to the current 180ish) …. maybe that’s some clue to predict how far down we’re going?

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  3. biliruben

    Unless you consider the bubble starting in Seattle in 1998, like I do. ;)

    Even what looks like reasonable gains in the first part of the decade are unhealthy.

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  4. biliruben

    We just broke 13000, BTW.

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  5. rose-colored-coolaid

    #2, I don’t think you can make that assumption. The years between 2000 and 2004 also correlated with a number of other things. The crash and then recovery in the stock market. Very low interest rates. News of a housing boom. If I remember correctly, things were pretty crazy in the housing market by 2004 around here.

    Anyways, the long story is that you can’t take 3 years worth of information about a housing market and extrapolate it to 10 years in the future. In fact, that should be THE lesson from this entire ridiculous misallocation of assets.

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  6. rose-colored-coolaid

    #4 Let’s go 17,000!

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  7. Alan

    I expect to see at least 16k for KC SHF inventory around the end of September. 17k wouldn’t surprise me.

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  8. Thomas B.

    I’m calling the bottom at summer 2005 prices.

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  9. Scotsman

    Other price data with a longer trend also suggests that 145-155 is in line with where the future will take us. Long term, housing is priced by wages and inflation, and somewhere around 150 is congruent with those trends. And I doubt Seattle is that special now, and in my opinion likely to be even less special in the future. California will always win out over Seattle because of the weather, and with their prices falling to levels below ours reverse migration will soon be the new trend.

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  10. vboring

    yeah, i bet people who lost power during the heat wave must really think Ca weather is special.

    another small factor for why seattle proper RE will do better in the long run: cheap electricity. seattle city light customers pay about half of what PSE, Tacoma, or SnoPUD customers do. the lower rates are due mostly to low cost energy from big hydro dams built early last century.

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  11. TheHulk

    reverse migration will soon be the new trend

    Ha! That would only happen if people were able to sell houses at the current grossly inflated values.

    Although its nice to see the split into high-med-low tiers, it would be even better to see how much volume in sales we are seeing in each tier. I strongly suspect the “spring bump” is the very few high end homes (> 1 million) sold a little better than expected.

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  12. b

    I doubt there will be reverse migration, but I would be very willing to bet the inward migration to WA will slow to a crawl. One of the big selling points to SV tech workers in moving up to Seattle was that, despite the chocolate weather, houses are cheap and you can live like a king off your California equity. Lets face it, the valley has much better weather and many more tech jobs than Seattle. Without the cheaper cost of living, there is not much of a selling point to move.

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  13. david losh

    The graph only goes back to 2000, that’s when it was started, but yes there is a gradual line of appreciation tied to the Consumer Price Index.
    http://research.stlouisfed.org/fred2/series/CPIAUCSL

    I can’t get the link to work, but if you look at the CPI chart there is a bump in 1998 where the line is curved to a higher rate of appreciation from then. What was the deal with that?

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  14. deejayoh

    I expect to see at least 16k for KC SHF inventory around the end of September. 17k wouldn’t surprise me.

    I think significant additional growth in inventory is unlikely. The typical seasonal pattern for Inventory is for it to remain flat over the summer before rising slightly in the fall. And given that we are currently at record inventory levels, the probability is much greater that we will be under the typical pattern than it is that we will be over the typical pattern. Regression to the mean and all

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  15. vboring

    @14

    the inventory may depend a lot on how distressed properties are dealt with.

    nobody WANTS to put their house on the market late in the summer, but some people may have little choice. a look at RE loan delinquencies in the area would be a good leading indicator for this.

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  16. deejayoh

    the inventory may depend a lot on how distressed properties are dealt with.

    Or not so much. Check foreclosure.com. There are 641 foreclosure listings across SFH + condos. Compare this to the ~17,300 listings on Tim’s tracker. It’s about 4% of the volume. Foreclosures would have to go up by 3 or 4x to have a material impact on that number.

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  17. Alan

    If inventory tops out around 13500 then in September we will see a +17% YOY inventory. I am basing my prediction on sustained 40% increases for the rest of the year. That could be a faulty model.

    How volitile is the YOY inventory change? Did it suddenly jump to 40% or was it a gradual change?

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  18. deejayoh

    40% YoY jumps can’t continue forever. IIRC, my guess back when Tim did the poll a few months ago was 14k for the peak. I still think that’s probably not too bad a guess.

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  19. deejayoh

    here are the poll results

    13,000-14,999 (14%, 29 Votes)
    15,000-16,999 (30%, 60 Votes)
    17,000-17,999 (18%, 36 Votes)
    18,000-18,999 (15%, 31 Votes)
    19,000-19,999 (2%, 5 Votes)
    20,000+ (21%, 42 Votes)

    21% predicted >20k!

    And here is the normalized inventory pattern for the past 8 years (vs average)

    Jan | 92%
    Feb | 92%
    Mar | 94%
    Apr | 98%
    May | 103%
    Jun | 107%
    Jul | 108%
    Aug | 108%
    Sep | 109%
    Oct | 106%
    Nov | 100%
    Dec | 83%

    So peak month and June are on average pretty close to each other. I am skeptical that the peak month can be 30% higher than June (which is what 17k implies)- particularly when you can see the rate of YoY growth leveling off in the numbers Tim posted. It looks to me like we are past the second curve on the “S” of the growth.

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  20. Bits_of_Real_Panther

    “California will always win out over Seattle because of the weather, and with their prices falling to levels below ours reverse migration will soon be the new trend.”

    I agree with the idea that migration will slow or maybe even reverse locally depending on the economics but California won’t be on the receiving end. California’s cities are falling apart. I’m in San Francisco for work temporarily and the word “chocolatehole” comes to mind

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  21. Alan

    It took four months to get from 21% to 44%. I’m going to use a weak heuristic and guess that it will take four months to drop from 40% to 20%. If we see 30% growth this month or next then maybe we won’t see 16k in September.

    Last year I was tracking inventory weekly for a few months before Tim automated the hourly feed. Inventory seemed to level off in June then started rising again in August. But maybe that pattern is due to the whole credit implosion and we won’t see it again.

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  22. Alan

    Correction: Make that “tracking inventory daily for a few weeks before…”

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  23. johnnybigspenda

    wasn’t inventory at record lows for the past few years? (ie. deep into seller’s market territory)

    wouldn’t a 40% increase over ‘record lows’ constitute a shift towards ‘balanced market’? (I admit that it has obviously swung past ‘balanced’ and more towards ‘buyers market’… but lets not get over excited about a large increase relative to record lows…. its all relative.

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  24. biliruben

    Though the records in the fog of time are pretty crappy, I think we are at all-time inventory levels now, spenda.

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  25. Alan

    Maximum sustained changes in YOY % change (does it even make sense to subtract percentages?)

    1 month: 10% / month
    2 months: 8% / month
    3 months: 7% / month
    4 months: 6% / month
    5 months: 5% / month
    6 months: 5% / month

    That is with 28 months of data. Certainly, not very much data.

    Using this primitive model and historical data,
    June is unlikely to have less than a 36% increase in inventory;
    July is unlikely to have less than a 26% increase in inventory;
    August is unlikely to have less than a 25% increase in inventory;
    September is unlikely to have less than 20% increase in inventory.

    Inventory peaked last year around 11500 in September. According to this model, inventory is unlikely to peak below 13800 this year.

    On the upside, we get 51%, 57%, 63% and 66%. September inventory is unlikely to peak above 19000.

    The average between that upper bound and lower bound is around 16500.

    I would be willing to bet $20 that the inventory is within my bounds.

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  26. deejayoh

    Alan –
    I’d suggest using the data from Tim’s spreadsheet. It gives you 8 years of history to work with, and you can see the last weak period in 2000/2001. Your “comparison”period above is entirely based on 2006/2007 – which if you look at the 8 year trend was an anomoly. Inventory grew every month through September. That is not normally the case.

    My belief is that when you are at a historical high, it’s much more logical to expect things to go lower than you expect than it is to expect them to go higher. Particularly when you are dealing with a constrained population.

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  27. softwarengineer

    YES DEEJAYOH, IF BY CONSTRAINED, YOU MEAN AVG HOUSEHOLD INCOME

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  28. what goes up comes down

    vboring: You have to be kidding me,

    “yeah, i bet people who lost power during the heat wave must really think Ca weather is special.

    another small factor for why seattle proper RE will do better in the long run: cheap electricity. seattle city light customers pay about half of what PSE, Tacoma, or SnoPUD customers do. the lower rates are due mostly to low cost energy from big hydro dams built early last century.”

    Now it is electricity rates that will save the Seattle RE market. Hmmm, I can see it now in a few months — “Well you know people actually like the clouds and drizzle. Skin cancer is a big problem these days — the rain helps to keep people in doors” What a JOKE.

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  29. what goes up comes down

    hey don’t these experts know that DOWNTOWN SEATTLE is where it is at:

    http://seattletimes.nwsource.com/html/businesstechnology/2008017848_office26.html

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  30. Interloper

    So, apparently the April bounce is not a statistical anomaly since it happened in all three price tiers.

    I’ll be real eager to see the May numbers, but if these numbers are based on a weighted 3 month average, I’d be very surprised to see a May decline in CS #s for Seattle.

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