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6.5% fits Seattle like a glove. Thus, Seattle is 16% overvalued according to the chart. However, Global Insight’s more in depth analysis puts Seattle at 22.8% overvalued, which is arguably more accurate because it takes additional factors into consideration.

https://www.nationalcity.com/main/micro-site/economics/commentary-analysis/pages/housing-valuation-analysis.asp?WT.vanity=HouseValuation

In Santa Barbara and San Diego, massive recent price drops have led to a 6% annual price increase from 1985 to 2008. These desirable cities have appreciated less over time than Seattle and are still dropping in price. That makes Seattle a little suspect IMO.

Roughly 2 years ago, Global Insight rated Santa Barbara as 58.9% OVERvalued. It is currently rated as 3.2% UNDERvalued and is continuing to drop in price. San Diego has seen a similar rapid correction and is now considered 9% undervalued.

This is evidence that once a regional area gets underwater, price corrections can take place at a rapid rate.It doesn’t matter what puts owners underwater, it only matters that they get there. For California, perhaps it was extreme exposure to subprime loans that triggered the freefall. In Seattle, it could be moderate exposure to subprime coupled with entering a recession along with job losses and rising interest rates that triggers the correction. IMO, if rent to own ratios and income to home price ratios are far enough out of line, and people get underwater, the correction will come.

I think there is a good chance that Seattle will see a fairly rapid correction of its current 22.8% overvalued rating, and along with the continued appreciation trendline of 6.5%, it could drop well into the undervalued range before this mess is straightened out.

In the meantime, the government is printing money in an attempt to inflate out of this mess, which could slow the price decline. However, the accompanying inflation actually seems to be aiding the price decline.

I’m not an economist, so take my opinion with a grain of salt, but I see Seattle prices being at much more realistic levels 2 years from now.

OTOH, some people have seen friends lose upto 20% value in a single year in phoenix / vegas etc. Some are even courageous enough to call the realtor’s bluff and put the house on the market. After all spring is the peak selling season! Now spring is gone, the clouds are coming back and no, sadly they are not the lovely dark clouds up in the sky, these are mean ass cumulonimbus sized equity stomping clouds!!

Spring has gone by. There has been no bounce. Brand new houses on the eastside (yes, i have seen a couple in redmond) are already selling around 2006 levels. The economy is in a tailspin, interest rates are a risin and those arm resets, hmm they will be coming soon. Even though the clouds in the sky look far away you certainly cannot ignore your Arm resets.

Realtors will still try to reassure customers (buyers are just holding out, the govt is helping you out!). The panic will truly set in time around september/october and then we will see 10-15% declines across the board by the time xmas rolls around.

Regardless of what may or may not happen, I think it is good that you would consider using charts of other metro areas to at least display feasibility to customers.

Or, I would equally think that it was an interesting effort to gain (long term) customers who would appreciate such a tact. I for one would appreciate a realtor who didn’t tell me that today was a great day to buy.

while I am saying it could be 3-5 years and 35% to 50% from peak before it turns around.

Wow, get ready be ostracized. Even around this blog suggesting prices might fall more than 30% is generally seen as crazy.

This chart is like Clint Eastwood’s “Do you feel lucky today?” Do you feel like a Boston or a San Francisco?

No, you’re on topic in my book….the whole mess has hit the fan and the downward trend in Tim’s charts and your blog are “Tweedle Dee and Tweedle Dum”.

I read your wonderful URL and re-published it’s reference in the comments section of Dr. Roubini’s RGE blog:

http://www.rgemonitor.com/roubini-monitor/253164/super-senior_tranches_of_cdos_are_worth_much_less_than_22_cents_on_the_dollar_another_ponzi_scheme_of_selling_toxic_garbage_with_more_leverage

My comments in the RGE blog stated:

AND BUSH JUST SIGNED THE HOUSING BILL: THE DAGGER IN THE DYING PATIENT’S HEART

Rather than blog on and on with supporting rationale for my title, here’s a great URL to read that sums it the mess we’re in all up:

http://www.oftwominds.com/blogjuly08/empire-debt7-08.html

A great opinion blog the above URL is, but I disagree or would clarify with one fundamental flaw [in my opinion] it states in part:

“….4. pension and entitlement programs designed for 10 workers for every retiree are now facing 3-to-1 or even lower worker-retiree ratios….”

The thirst for more pension growth [recent American overpopulation growth since 1990, i.e.] has made it far worse and in my opinion [excluding the preditory lenders] is the root cause for the credit crisis housing panic demand to “buy too much now, before its too late” we’re experiencing today. The article clearly excludes this root cause explanation.

Kudos for it on this excerpt:

“….6. stagnant/declining wages and rising unemployment are the inevitable result of reduced borrowing/spending by consumers and government alike….”

The American addiction to continuous population growth to mysteriously prop up future pensions is a pipe dream. Our wages collapse faster and as more bailout debt is incurred with world recession banks tightening credit in unison, I predict $100K average priced homes in America needing 30 year fixed 20% down and a minimum $100K household incomes [with no debt] to qualfy soon at a theater near you soon, if uncontrolled growth [overpopulation] continues on the reckless path it’s been on since 1990.

Correct me, if you think I’m wrong.

Written by Softwarengineer on 2008-07-30 09:53:47

Nice tool. So Seattle RE has tracked to about a 6.5% annual increase since 1985. The first spike in 1990 took 6 years of below-normal appreciation to correct back to the norm.

The spike in 2005 looks like it is now 1 year into the correction with about 4-5 more to go. Meaning normal appreciation would resume in 2013. Dude, that’s a long time to wait before buying a home looks good on paper.

It’d be nice if we could get some substantial price beat-downs to accelerate us back to the norm, but the Federal government is not going to allow it (as I have stated in previous posts).

http://www.oftwominds.com/blogjuly08/empire-debt7-08.html

Approximately 84 Bank Owned properties in King County which are active home listings (excludes condos, includes all active, contingent, and requested b/u).

$1.2 mil high price, $138k low price, $289k median price.

Approximately 680 short sales listed in King County, did not do stats on those.

I see lots of houses listed for very high asking prices, but the ones that are moving are turn-key remodels that are priced aggressively in today’s market. People are buying, but they expect value for their money.

It is interesting that the NW cites are also showing the same pattern as California but lagging by 17 months. It doesn’t seem to me that we will go down as far as CA because we never had the same run up, and our buyers were less exposed to risky loans. Unfortunately, the New York Fed removed the historical data to its high interest loan chart, so I can’t get a really good idea of how we might be correlated to California’s risky loan exposure pattern.

That being said, prices went up due to economic fundamentals that no longer exist , so they WILL correct. I expect the typical 4% appreciation will eat away and help make up the difference as time continues, but I also expect to see continued price deprecation until prices line up with fundamentals.

So I made a new tool that allows you to plot various compounded interest rates against historical prices to get an idea of what might be considered normal.

http://housingcorrection.com/compoundincrease/compoundincreaseform.aspx

I was wondering and maybe I missed this somewhere.

Can you dig up information on how many of the listings out there are short sales and foreclosures?

Just curious

Comparing to other areas is difficult.

Anyhow didn’t many of the major areas see a large downfall when the mortgage crisis really hit hard in the last year?

How much of a decline did Seattle see before the mortgage crisis? I haven’t really followed the numbers so I am not sure.

Like it has been said over and over the areas that went up the most have been the hardest to fall.

It seems like there are so many factors that go into figuring out the price of real estate. Getting funding is a big factor for buying a house.

I have read that people think real estate will drop 30% and some think even lower then that.

I might be wrong, Seattle seems to be holding its own. Time will tell.

so far.

it has yet to be seen whether being late to the party will make our correction more or less violent than has been seen elsewhere.

people have seen that prices falling 28% in 1 year is possible, so there should be more fear here than there was in Las Vegas when they were only down 6.5% YoY and were convinced it was just a small pullback before prices rocketed to infinity.

but, we just passed a housing subsidy bill, so maybe this will reduce some of the fear.

This is the story Real Estate agents have been tracking today.

I have a few questions. I am not looking for extact numbers here but wonder what some you think.

1. How much of the inventory are short sales and foreclosures?

2. How much of the inventory is people that need to sell due to other reasons?

3. How much is homeowners just trying to see if they can sell but then don’t need to move for any specific reason?

I would think that these things would effect the inventory levels.

For example we removed all the sellers who really don’t need to sell. What would the inventory level look like.

Also it looks Seattle has held up alright considering the mortgage crisis.

Just my thoughts.

It would be really awesome to get a second view of the “rewind” chart, which would go back a few years further. Like say going back to 2004 when price appreciation really seemed to get out of control. That would help the potential buyers out there get a better gauge of where the market might be heading.

is it possible that we’re seeing YOY price declines of just 6.5% because desperation hasn’t set in yet, but will this fall?

the other big factor that forces price declines is foreclosures. because we came to the game late, is it possible that our foreclosure rates will be lower and that this will make price declines slower?

being late to the depreciating price game makes foreclosures slower because banks have no interest in foreclosing properties, so they give people longer before foreclosing and now the housing bailout bill may further reduce foreclosure rates.

so, which is it? will double-digit price declines begin this fall/winter as desperation catches up with people or will lower foreclosure rates mean that we get to have slower depreciation rates for longer?

either way, i’m looking at moving to a nice cheap 3rd tier city (pop 100k-500k) that actually has a summer. and maybe a winter. i’m thinking Albuquerque might be nice.

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Next month the June sales numbers will replace the March sale numbers in the CSI, so I am expecting a pretty good upward tick. Seattle CSI has been flat now for 4 months, while the top 4 cities I mentioned above are still falling. If that trend continues for another 5 months, Seattle could become the top performing market of the decade. That is pretty striking considering how strong the run up was in other markets.

Absolutely – I was just pointing out that Softwareengineer was wrong. Will they go up? Probably.

And I agree with Patient about the jumbos needed in Seattle and the Eastside.
Then again, even for Joe and Jane Newlyweds, making $72K combined; a $300K loan is a ton of money at 5, 6 or 7%.

Actually, the rates have gone down since last week. They were over 6.5% for the 30 fixed.

Still, it does not make it a good time to buy.

A few months ago I was one of the regulars thinking we were going to hit 10% price decline by July. Looks iffy right now.

Here’s sample bank rates for this week’s continuous weekly spike:

NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 6.38%
15 yr fixed mtg 5.93%
5/1 ARM 5.90%

This week (July 24 – July 30) the experts say: Mortgage rates still have a ways[a ways, with the recent $300B Housing Bill added in try a huge chunk] to go up.

The rest of the URL:

http://www.bankrate.com/brm/static/rti.asp

No wonder the media doesn’t flaunt low home interest rates anymore….lol

Also, weekly interest rate spikes won’t affect 2008 affordability or cause price collapse; yeah, and I have a bridge I can sell ya too.

The non-offset Case-Shiller graphs are very useful. Continue the great work. One thing I would like to see on all your graphs is for the the gridlines showing dates to be displayed every year rather than every 4 months. This would help to visualize the yearly cycles as well as the general trends.