Number one Case Schiller is the Holy Grail here on the Seattle Bubble. It’s free.

There is no discussion about the numbers because no body cares. It shows a decline in housing prices that’s based on actual data. That’s it, end of story.

As far as the NWMLS goes there is a previous comment from economist and discussed with AMS that Real Estate is between a buyer and seller.

It makes no difference what a seller is asking, the buyer makes the deal. Any ammunition is fair game in a negotiation.

Case Schiller, Trends Graphix, NWMLS, or Realist it’s all the same, nobody cares, it’s between the buyer and seller.

I have a rant in here about agents not taking low offers, or not letting agents present thier offers, but hey, that can wait for another day. I don’t need to go into every thought I have about the subject.

The RE market just “looks” different from the stock market because for the stock market both the asks and the bids are online, but for the RE market only the asks (properties for sale) are online. The bids aren’t visible. But obviously there are far more people willing and able to pay, say, 100K for a house in Seattle than there are houses for sale. The issue is not a lack of bids, but unwillingness of those trying to sell properties to meet bids. In other words they are asking too much.

That lack of information is part of the reason the real estate market moves slower than stocks. Even with direct access to the NWMLS data (not the slower published reports) there’s roughly a 30-45 day delay in knowing what happened in a given area.

It is nice seeing people call out Steve with facts, funny that he hasn’t responded.

On other fact sort of related to that. He claims he predicted 2007 would be flat. From January to the peak in July the increase was over 11%. Now part of that is seasonal, but my point was more of the 20% or so decline since the peak, roughly half of that is the increase that came during 2007. So even assuming he said prices would fall 20%, he would only have been right because he didn’t see over 10% of the increase. Or stated differently, the fall would have been roughly 10% from when he said 20%.

By Kary L. Krismer @ 79:

By AMS @ 71:

RE: Kary L. Krismer @ 20 –

Please note that C-S uses a paired sale methodology.

Yes, I know that. But it also deals with a three county area. Even within each county properties don’t move up and down in concert. They need to somehow deal with where properties are selling and what properties are selling.

To solve the problem, a simple technique might be weighted averages.

The do use methods to try to compensate for a lot of things. For example, if a house hasn’t sold for 20 years, that sale is given less weight than a sale of a house that sold 5 years ago. The thought is change in condition is likely to be greater over 20 years.

But I’ve yet to hear or see how they deal with the geographic issues. Just as an example, roughly a year ago sales in Auburn and other parts of south King County were way off in volume and price compared to the rest of the county. But the number of houses in that area probably increased slightly due to new construction. If they didn’t account for the volume change relative to the rest of the county, those few sales that did occur would understate the declines in those areas.

By Kary L. Krismer @ 20:

Case-Shiller has become practically irrelevant compared to the much more timely NWMLS numbers. The reason? No volume data. Volume is far more critical (and crippled) right now compared to price.

Please Kary. Volume is not especially relevant unless your livelihood depends on making sales.

I disagree. The only interest people really have in home price trends is the answer to one question: “How hard will it be for me to unload this place if/when I want/need to?”

It (probably) doesn’t help me as a prospective seller if a tiny number of houses are selling for 350% what they sold for a year ago, while the rest are languishing on the market for months on end. The value of an investment can’t be completely understood without considering sales volume and its corollary, time on market.

There is a willing buyer for every property for sale in the metro right now. Only question is how much they are willing to pay.

As I said, the misconception that there is an excess of sellers over buyers in the RE market is a result of properties for sale being listed publicly but not buyers. If there was a “buyer’s MLS” where buyers could list their bids, it would be obvious that there is never a shortage of buyers per se. It would also be obvious what price sellers would have to accept to make a sale, just as in the stock market. Not exactly of course due to lack of product uniformity, but you get the idea.

On a micro level, everything has some monetary value, even if it is negative. For example, you pay to get rid of garbage (negative economic value). There are time people pay for the land, and the buildings have negative value, since they are going to be razed, so the cost must be deducted from the value of the land without the buildings. On a macro level, entire towns do go ghost.

Stock markets there is a buyer for every seller at some price hence 50% plus decline. Real estate for every seller there may not be buyer.

Not so. For RE there is also a buyer for every seller at some price (well maybe not in Detroit, but certainly in Seattle).

The RE market just “looks” different from the stock market because for the stock market both the asks and the bids are online, but for the RE market only the asks (properties for sale) are online. The bids aren’t visible. But obviously there are far more people willing and able to pay, say, 100K for a house in Seattle than there are houses for sale. The issue is not a lack of bids, but unwillingness of those trying to sell properties to meet bids. In other words they are asking too much.

By patient @ 2:

3.6% decline in one month!? That’s a staggering number.

Some notes:

- 43.2% annualized decline rate.
- If you bought in October 08 with 5% down you were already under water on your mortgage by January 09.

Staggering.

Because of transactional costs, if you bought with 5% down, then you are underwater right after purchase. The decline in market value only makes matters worse.

So, if you bought with 10% down on Oct 08 you were already under water in Jan 09….pretty brutal since you will just find yourselves in a deeper and deeper hole.

Case Shilller is by far the most relevant measure out there for home valutation.

By AMS @ 71:

RE: Kary L. Krismer @ 20 –

Please note that C-S uses a paired sale methodology.

Yes, I know that. But it also deals with a three county area. Even within each county properties don’t move up and down in concert. They need to somehow deal with where properties are selling and what properties are selling.

To solve the problem, a simple technique might be weighted averages.

I was playing around with some of the CS numbers this morning and what was surprising to me was that Seattle home prices declined the most during the last quarter of 2008. The last half of the year was when most of the annual decline occurred.

I think that partly reflects the underlying pattern of relatively higher summer prices. This is also why during the bubble years, prices rose faster in the first half of the year as they built up to a summer peak. We should see the price declines lessen after Jan and pick up again in the second half of the year.

-Shameer (long time reader, first time poster :))

From your article October 2007:

“Home prices may drop an average of 10 to 20 percent during the correction, but keep in mind I am talking about dropping from the very peak of housing boom prices.”

“I don’t buy into the “gloom and doom” scenarios being promoted by blogs such as seattlebubble.com, which has been predicting the imminent collapse of the local real estate market for a long time. While I give it credit for pointing out that many people in the Seattle media were overly optimistic about the Puget Sound real estate market during the boom, I think the bubble bloggers tend to be overly pessimistic.”

http://www.lifeandlimb.net/store/index.php?main_page=product_info&cPath=23_16_25&products_id=81&zenid=ogdrgpmhqmnd9uda0ars42mod1

ps sorry if the link doesn’t work I am not very versed in formatting these things.

Month Volume SFR and Median
Dec 2008 1,014 $399,000
Dec 2007 1,451 $435,000

Note that they’re reporting about 85 more sales than the NWMLS at a median that is $4,500 lower. Unfortunately they don’t report their criteria, so I don’t know if the difference is FSBOs, or FSBOs and foreclosures, etc. I’d guess just the former given the small difference. For November the volume difference was smaller, but the price difference greater.

Anyway, it’s a useful tool in that it can also be used to compare to NWMLS data, but unlike C-S, it can also be used to look at volume.

Kary has had this discussion with others on other blogs. Well others have at least defined the merits of the CS on the blogs which Kary regularly posted to.

Yep, and unfortunately some people still think Case-Shiller is some sort of a useful tool despite all its shortcomings. I use is more as a tool to see if there are any big discrepancies with the NWMLS data–whether they might be somehow skewing the data. For the past several months there was no indication of that with price, because the NWMLS was more pessimistic than C-S. Unfortunately I have no such tool to judge volume by.

RE: Kary L. Krismer @ 54 – Kary, from your comments I gleam that you don’t understand the methodology that CS uses. Your arguments against it seem to be based on the fact that it’s less timely, and ergo a less accurate measure. But, housing is a slow market. Why does it matter if it takes a couple months for accurate numbers? Official numbers for unemployment and GDP are often revised 1-2 months after their initial release.

Does anyone have a link to the CS methodology that Kary could read so he would know what it’s real strengths and weaknesses are?

Because today is February 24. They’re reporting on sales in December that were largely written up in October and November. Giving us information that we largely knew sometime before January 10. Giving us information for an area that is too large to be useful to anyone (an argument I’d make for the NWMLS King County data too). And not giving us any idea of volume, which at times is a lot better gauge of the health (or lack thereof) of the market.

If you guys are looking for the perfect judge of market price, you’re not going to find it with Case-Shiller. You’re not going to find it anywhere except looking at comps of similar houses in close proximity to property you’re interested in valuing.

Oh, and don’t assume I don’t know anything about how Case-Shiller works. I know that if a property goes up too much to fit within their model, they assume it has been changed and exclude it.

RE: Kary L. Krismer @ 20 –

Please note that C-S uses a paired sale methodology.

Yes, I know that. But it also deals with a three county area. Even within each county properties don’t move up and down in concert. They need to somehow deal with where properties are selling and what properties are selling.

By Kary L. Krismer @ 20:

Case-Shiller has become practically irrelevant compared to the much more timely NWMLS numbers. The reason? No volume data. Volume is far more critical (and crippled) right now compared to price.

Please Kary. Volume is not especially relevant unless your livelihood depends on making sales. For the 97% of the population who are neither builders, brokers, nor real estate agents, the CS numbers are much more interesting than volume data.

For the other 3% of you, you’re right though.

Actually, volume is very important to buyers and sellers too. It’s only not important maybe if you just think about buying or selling real estate, with no plans to actually do either.

By Kary L. Krismer @ 54:

I wonder how C-S deals with the geographic aspect of sales? With the December snow and low volumes, the geographic mix of properties should be different than prior years or months.

That’s the great thing about C-S… it doesn’t matter. House to house sales only. No sales of garbage condos, no new construction. No effect from “tier shifting”.

Wrong. That’s impossible. If for example, 90% of the sales were from Snohomish County, then the numbers would be different than if 90% of the sales were from King County. They have to account for what’s selling where somehow.

“Washington’s unemployment rate up again in January

OLYMPIA – Washington’s seasonally adjusted unemployment rate increased to 7.8 percent in January 2009, up from December’s rate of 7.1 percent, according to the state Employment Security Department.

The rate usually is supplied each month by the federal Bureau of Labor Statistics (BLS). However, BLS data for January has been delayed due to a computer project, so Employment Security calculated the number using a computer model that historically has closely matched the official number.

In January, the state lost an estimated 7,000 non-agricultural jobs, seasonally adjusted.

Industries with the most job growth included merchant wholesalers of nondurable goods, with 1,000 new jobs, general merchandise retail stores, which added 1,100 jobs, real estate and rental leasing, up 800 jobs, and arts, entertainment and recreation, with 1,100 new jobs.

Job losses were seen in most industries, but the largest declines were in manufacturing, which cut 4,900 jobs, information services, down 3,300 jobs, construction, down 2,400 jobs, motor vehicles and parts dealers, down 1,400, truck transportation, down 1,300, merchant wholesalers of durable goods, down 1,000, computer-system design and related services, down 1,000, and accommodation and food services, which lost 900 jobs.

Year over year, Washington had 56,000 fewer jobs last month than in January 2008, a 1.9 percent decrease. Nationally, employment declined by 2.9 percent over the past year.

An estimated 303,570 people (not seasonally adjusted) in Washington were unemployed and looking for work in January – the largest number ever in this state.

“These are rough times for the unemployed, but it’s also an opportunity to get some training for a new career,” said Employment Security Commissioner Karen Lee. “Everyone who has lost a job recently should check with WorkSource to see if they qualify for any of our training assistance programs.”

For example, someone laid off from a “declining industry” may be eligible to receive unemployment benefits, tuition assistance and other aid to retrain for another occupation. Lee noted that, in this recession, more and more occupations are being added to the declining-industries lists.

Job seekers can find out about training programs and get help looking for work at Employment Security’s affiliated WorkSource offices across the state, where a variety of employment services are offered, including free help with interviewing skills or résumés and with job referrals. In addition, nearly 15,000 current job openings are posted on http://www.go2worksource.com.

Locations of local WorkSource offices are listed in the blue pages of telephone books and online at http://www.go2worksource.com. Assistance also is available by phone at 877-872-5627. “

Hello Steve,

Thanks for stopping by for a little self promotion.

Let’s see, as I recall 2005 and 2006 were years of double digit appreciation, I’d look it up, but why bother with facts. I think it was 14% and 17% for a two year total of a little over 30%.

If you had a prediction that the real estate market would give up those two years worth of appreciation that seems like a very safe bet.

So you’re saying that by retelling a known fact that some how that consitutes a prediction.

What would have been astounding is if you would have, as a mortgage professional, predicted the “credit crisis.”

You were making predictions weren’t you? You want us to turn to you as an all seeing all knowing kind of oracle don’t you?

So if you saw that house pricing was soooo over valued why did you continue to originate loans on properties you knew were over priced?

Does anyone have a link to the CS methodology that Kary could read so he would know what it’s real strengths and weaknesses are?

Please note that C-S uses a paired sale methodology.

Of course you’re right.

Banking deregulation I’m sure is what you’re referring to.

Sept 30, 1995: Congress enacts Truth in Lending Act “reform,” easing regulations on creditors; bill powered through by Rep. Bill McCollum (R-Fla.), a key recipient of finance, insurance, and real estate (fire) donations ($136,000 in 1993-94).

Dec 22: As part of Newt Gingrich’s Contract With America, Congress enacts a measure making it more difficult to sue companies for securities fraud.

Aug 2, 1996: Office of Thrift Supervision issues rule preempting almost all state laws regulating S&L credit activities.

The list goes on and culminates with

Nov 1999: Gramm-Leach-Bliley Act guts Glass-Steagall, setting off wave of megamergers among banks and insurance and securities companies. Driving force is Sen. Phil Gramm (R-Texas), who has received $4.6 million from fire sector over previous decade.

This has been discussed on other threads and it does infect the entire business culture in the United States.

3.6% decline in one month!? That’s a staggering number.

Some notes:

- 43.2% annualized decline rate.
- If you bought in October 08 with 5% down you were already under water on your mortgage by January 09.

Staggering.

Because of transactional costs, if you bought with 5% down, then you are underwater right after purchase. The decline in market value only makes matters worse.

Case-Shiller has become practically irrelevant compared to the much more timely NWMLS numbers. The reason? No volume data. Volume is far more critical (and crippled) right now compared to price.

Please Kary. Volume is not especially relevant unless your livelihood depends on making sales. For the 97% of the population who are neither builders, brokers, nor real estate agents, the CS numbers are much more interesting than volume data.

For the other 3% of you, you’re right though.

BWNikes,

I’m not a macro guy, but I would look into a few things which would affect stocks:

1) US Trade policies, and growth in global trade (Think China)
2) Foreign and domestic financial policies.
3) Mutual fund & market participation by individuals via the internet.

Deejay,

I would agree with you that Japan does understate their unemployment. But a few things to keep in mind: Japan is a very thick social welfare state. (National healthcare, pensions, etc)

They effectively made sure that their stimulus would smother the fall, by creating part-time jobs, contract work, etc. People were able to work to feed themselves. Now the US is a completely different animal when it comes to providing social benefits… as some previous threads on SB have shown…

RE: seawaterszzz @ 56 –

I heard that too, but I instantly thought to myself that our unemployment rate is already several % points higher than Japan’s ever got.

Judging by the guys I saw living in the park in Tokyo I would bet that unemployment is vastly under reported in Japan. the story I was told by a local was that they were laid off in the 90’s, and it was so shameful that they never went home. They were dead to their families. Not sure if it was true, but it was odd to see these guys in suits living in blue tents 10+ years later in a downtown park.

I didn’t come up with this theory and I don’t necessarily subscribe to it but it’s rather coincidental and interesting the overlap of this time period with the so called Republican Revolution. The 1994 midterm elections heralded the first time that Republicans had controlled since 1952. In January 1995 the House would elect Newt Gingrich as Speaker.

Not long ago, “There is no bubble”; and Seattle was somehow “immuned” to the market forces that other areas were seeing. Now the only thing keeping us from being another poster child is the fact the media has become inured to precipitous drops in housing.

Oh, how far we have come in such a short time….and a ‘hat tip’ to Tim for keeping the faith all these years.

I wonder how C-S deals with the geographic aspect of sales? With the December snow and low volumes, the geographic mix of properties should be different than prior years or months.

That’s the great thing about C-S… it doesn’t matter. House to house sales only. No sales of garbage condos, no new construction. No effect from “tier shifting”.

I’m not intending to rehash history for the sake of it, but I really wonder if the institutional speculation that occurred then wasn’t also a byproduct of something else changing in the rules of the game. If so, it might shed some light on what to expect for future growth without massive speculation in play for a little while. Or it might instruct us to throw our arm up and catch the next ride. It’s really hard for me to believe that all of those trillions burned through in the dot bomb were representative of cash that had been sitting on the sidelines just waiting for an opportunity to be spent.
Unchecked institutional speculation played a heavy hand in both the dot bomb and housing bubbles and probably won’t be back for a while yet. Life still goes on outside the casino.

I heard that too, but I instantly thought to myself that our unemployment rate is already several % points higher than Japan’s ever got.

http://seattletimes.nwsource.com/html/businesstechnology/2008780477_webjobs24.html

Since the population of Seattle is a lot bigger than anywhere else in the rest of the state, I take that to mean that the unemployment rate outside of Seattle (or maybe the metro area) must be greater yet than 7.8…

Looks like Seattle is still a little island of specialness. Just sayin’.

1993 Clinton outlined a deficit reduction in his State of the Union, 1994 he had made reductions to the deficit and proposed a more agressive plan to present to Congress. He cut spending then asked the people to kick in an extra $100 a year for deficit reduction. Bold moves villified by Newt Gingrich.

Yes, Sandy….I would present it. Verbally of course. But, the key is knowing your Buyers. We work with nobody unless we have a signed Buyers Agency Agreement on file and a Pre Approval letter less then 60 days old. I could only wish all Agents screened their buyers as good as we do.

According to Mr. Koo, when Japan entered its lost decade in the early 90’s, real estate prices plummeted but the government was able to sustain both GDP and a low unemployment rate through various government-funded stimulus measures. I was not a believer in the potential effectiveness of the U.S. government stimulus measures until I listened to this interview. I’m still not a believer, but now I’m halfway there. If the U.S. follows in Japan’s path, and the stimulus works, U.S. real estate assets and stock prices may remain low or go even lower, but at least unemployment figures may stabilize in the not-too-distant future.

Agreed.

Weren’t we also coming out of a mini-recession at that time also?

RE: patient @ 2 – I’m shocked. I did not think 3.6% decline was possible for December.

And since CSI uses a three-month rolling average, we can’t expect January to be much better.

Especially since the NWMLS has already posted numbers for January that were far below December.

I wonder how C-S deals with the geographic aspect of sales? With the December snow and low volumes, the geographic mix of properties should be different than prior years or months.

Geez,

Between 1995 and 2001 the Internet experienced what is now referred to as the dot-com bubble, which was the time dot-com companies and websites were making an enormous amount of money primarily off of stocks until the bubble started to burst in 2000 and Internet companies started going under.

And since CSI uses a three-month rolling average, we can’t expect January to be much better.

Keep in mind that one of the things that many people object to about Microsoft is that they are not a creator of new technology, they “embrace and extend” what other companies have created. Just ask Apple. They tend to be a 2nd or 3rd entrant into any given market, and then through sheer size they are able to dominate.

I had a job waiting tables in 1994 – and used my first computerized order entry system at that time. I was part of the switchover from writing it down on a pad of paper, to entering orders on a touch screen. We thought it was pretty cutting edge at the time, but within a couple of years you would see this at the majority of big restaurants.

I still think that was the big change. Like Dave mentions, computerization and networking allowed all types and sizes of companies to become more profitable, so you would see the bump happening in all industries, not just tech stocks. Computers were in place in many larger businesses prior to the ’90s, but that was when it came into reach for the majority, even small businesses, and it was simultaneous with other advances, such as the internet , that allowed businesses to make more money.

There’s probably other things that play into it too but I think this was a pretty big cultural shift.

Well, remember indices can kick out and bring in new corporations, so all DOW or S&P need to do is get rid of some poor performers (Like C, BAC, GM currently are) and bring in some healthy companies and the index is manipulated that way. They don’t track the same components forever.

I came out of the tech industry before real estate and though I think technology has made a huge contribution to the lives of those who can afford to use it, it’s also been disruptive as well. Just as with automation, there have been changes to how people work that have caused a lot of money to move around. Jobs eliminated, new jobs created, huge profits made and losses taken. Entire economies (think India) changed with the ability to do business from half a world away. We’re more one world than we have ever been in human history, with all the good and bad that comes with that. That accounts for a lot of why the last 10 – 15 years have been such a wild ride.

IMHO of course.

Thank you Sandy and Welcome!

Windows 95 was the first operating sytem advancement made for the common folk. Many people caught the computer bug by uploading thier first major revamp of the Windows operating system.

My brother in law at the time has a motorcycle shop. He invested $60K in computer program to track all of his parts. Another person set the system up but he was able to handle the day to day operation. The system paid for itself the first year, and after that it added $60K to $100K to his bottom line.

Those were great years for business.

As Microsoft went to court and lost a monopoly case with the Federal Government around 2000 many people thought the computer operating business was going down in flames. There was in my opinion a noticable shift in investments from stocks to Real Estate.

If you go back to 1987 you see a sharp incline in stock prices with what I think was the anticipation of computers being used more and more in business applications. Many businesses benefitted from the use of personal computers. Many businesses made more profits.