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.

12 responses to “May Seasonally-Adjusted Active Supply by Neighborhood”

  1. Marc

    Sorry to be negative, but your SAAS calculation seems arbitrary and of limited utility. I re-read the original SAAS post and remembered thinking at the time I first read it that your assignment of “weights” to each month in the year and your determination that 2 months is a balanced market “based on what SAAS value seems to result in a sustainable level of price appreciation” is completely subjective and no more or less valuable that Ardell’s bottom call. I didn’t agree with her bottom call then and I’m not willing to simply accept your estimate either. Unfortunately, many of the newer visitors to this site might not understand what your SAAS is (or is meant to be) and may incorrectly give it un-merited credence as an objective measurement of the market.

    I recommend you indicate on future versions of this post that the conclusions drawn have a significant subjective component which is based on your personal analysis of the local real estate market.

    To end on an up note, the fancy charts are nice.

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  2. Marc

    Common, longstanding acceptance for one. For good or ill, the six month mark for a balanced market (or more accurately, MOS above or below 6 months) has been pretty widely accepted as generally accurate in describing which side (buyer or seller) has greater or lesser bargaining power. The anecdotal evidence is very persuasive (just ask somebody trying to buy a $400,000 craftsman near Greenlake). However, anecdotal evidence is just that and little more.

    So long as the manner in which the months of supply is calculated is uniform (and the data is accumulated uniformly), it remains a useful tool but only one of many tools that should be in the buyer’s or seller’s tool box. When the NWMLS changed the input, the output indisputably changed rendering apples to apples YOY comparisons between the two methods essentially meaningless. At this point we have to wait for sufficient time to pass in order for a sufficiently large amount of data points to be determined before the YOY comparisons of MOS are useful once again.

    Obviously, your SAAS is meant to fill in this void and perhaps it’s better than nothing. My concern is that it not be given too much credence as an objective measure of the market. As should be clear by now, there is no truly objective measure as every attempt to gauge the market, from Ardell’s bottom call to Professor Shiller’s fancy report, is limited in scope and cannot accurately predict the future.

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  3. Marc

    It’s your joint, so more power to you. How did you determine the weights to give each month?

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  4. Matsayswhat

    I’ve been following along and while I don’t know that I necessarily agree with the EXACT numbers Tim is using to smooth the charts to correct for seasonal variation, I do think that overall he’s provided some very interesting information. In the least it’s way more valuable than MOS.

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  5. deejayoh

    FWIW, Altos Research uses a similar approach to defining the health of a market (buyers vs. sellers) – they call it “Market Action Index” and as far as I can tell it is their own proprietary approach to looking at a seasonally adjusted MOS. They seem to express it as the inverse of the MOS.

    http://www.altosresearch.com/forums/viewtopic.php?f=7&t=10

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  6. sf_boomerang

    The Tim,

    I just want you to know that I am currently giving the SAAS a billion trillion quadrillion units of credence as an objective measure of the market, and will be using it as my sole guide to buying a house. Which I plan to do immediately.

    I will of course blame you if this does not work out well.

    Cheers.

    :)

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  7. George

    No matter the index and the weighting the overall trend will be the same. The lower the price and closer to an urban center the smaller the cycle swings. You can see this in the numbers above for Seattle and the numbers for MLS area 530 (East Bellevue) for Bellevue. These areas have the most affodably priced houses adjacent to transportation and job bases. Picking bottoms and looking for stability can be very difficult. So far the work Tim has done is the best I have seen but looking for “balance” and “stability” is very difficult and gets to be a little like Quantum Mechanics where the more you measure the less you know. In general using more fields with larger data bases can help define trends. Using “derivative” inputs such as SAAS can be helpful to try and look for inherent versus aborational trends but you need to understand that is the ultimate goal of these tools. .I understand Tim’s frustration with the present mess on pending sales and desire to derive long term trends by using seasonal adjustment not just have this the usual “spring blip”.

    Making predictions on either SAAS or MOS can be dicey. A market that has decliing supply trends and increasing price trends can turn on a dime. Is this the last few months just “pent up” demand or a long term trend. Areas with great looking MOS or SAAS numbers which might predict increasing future values can go poof like East Bellevue if MicroSoft announces 10,000 lay offs tomorrow. I hope not. Hopefully the new windows launch will tbe the new age of prosperity.

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  8. George

    RE: The Tim @ 10 – I think this should be taught at every time first time home buuyers seminar.

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  9. Softwarengineer

    RE: George @ 9

    GOOD OBSERVATION

    Month to month trends are meaningless during the summer “I got to sell quick before the new school year to get to my new out of state job” period.

    Another anomaly worth mentioning; do we also need a chart on current supply of unsold homes [but homes the sellers wanted to unload, but at unrealistically high prices] pulled off the supply/listing backlog, because the sellers could afford to just wait and see if the media’s YOY misinformation that “we’ve hit the bottom of the economic mess this year” will be true this time. I saw this as a rampant anomaly with Seattle sellers of existing homes in the mid-eighties bubble pop and the new homes crashed 25-30% in price simulatneously [these builders did not have the luxury or spare cash to wait it out and hope]. By 1990, even the existing home sellers started giving up hoping on false media promises [I bought in then]…LOL

    The “Peter Crying Wolf” media trying to convince us all that the ruined economy is bottomed, have been totally wrong YOY, and most Americans don’t believe the “Peter Crying Phony Wolf” tripe anymore.

    I’d also add a very critical “footnote”: comparing this current economic mess to the saving and loan bank crisis caused by an overpopulated baby boom housing market hitting an unprepared banking system in the 80s is like comparing that “anthill” overpopulation debt problem to today’s “Mt Everest” overpopulation debt problem. I predict that many in upside down loans will “wait it out” until the foreclosure papers are in the mail, they have to.

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