Let’s make our regularly scheduled monthly check on the Case-Shiller Home Price Index. According to March data,
Up 0.2% March to April.
Down 16.8% YOY.
Down 22.3% from the July 2007 peak
Last year prices rose 0.7% from March to April and year-over-year prices were down 4.9%.
Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland continued to turn in a slightly smaller YOY loss than Seattle. Meanwhile, down in SoCal, the losses continue to get smaller. If Seattle and Portland keep following the trend set by San Diego and Los Angeles, we will see the most extreme YOY drops next March.
Note: This graph is not intended to be predictive. It is for entertainment purposes only.
Here’s the graph of all twenty Case-Shiller-tracked cities:
In April, eight of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle (the same number as the previous four months). Denver at -4.9%, Dallas at -5.0%, Boston at -7.7%, Charlotte at -10.0%, Cleveland at -10.5%, New York at -12.2%, Atlanta at -15.2%, and Portland at -16.0%. As usual, Phoenix had the largest year-over-year drop, with prices falling 35% in a single year.
Here’s an update to the peak-decline graph, 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 the total number of months since each individual city peaked.
In the twenty months since the price peak in Seattle prices have declined 22.3%. April’s uptick brought us further from the trendlines of Phoenix and Tampa, and closer to San Francisco. April saw similar upticks in Seattle, Portland, San Francisco, DC, and Boston.
Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.
Seattle’s Case-Shiller value for April 2009 of 149.38 came in just above its May 2005 value of 148.97. Prices have now “rewound” a full four years (longer than this site has been in existence).
Finally, the following chart takes the post-bubble years of 2007, 2008, and 2009 and indexes each January’s Case-Shiller HPI to 100 so we can get a picture of how this year’s declines compare to last year:
We got the uptick we were expecting for April, but compared to last year’s bump, I’d have to call it somewhat… anemic. If price declines only manage to match last year, Seattle’s index will be just over 29% off peak by December. If we continue to turn in stronger price drops than 2008, we’ll be closer to 32% off peak by December.
Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.
(Home Price Indices, Standard & Poor’s, 06.30.2009)
If predictions couldn’t be made, bubble blogs wouldn’t have surfaced around 2005 dumba$$.
And we were right…..so [naughty naughty trying to avoid the word filter] you.
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RE: EconE @ 101 – You were lucky. And not that lucky–you had a 50/50 chance [ignoring the world where prices are flat for 5 years].
Eleua was right, or close enough.
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RE: EconE @ 101 – I take that back. May 2005 the King County median was 370500. May 2009 was 375000. Since you all seem to think real estate should be bought and sold like a day trader trading stock, you’ve not only lost a lot of profit, but you’re still underwater.
But in reality, the bubble mentality goes back to at least 2002. Those people are really underwater. The median back then was under $333,000. The market went 44% higher than that. Not even close to being right. And a lot of potentially tax free profits lost.
It really isn’t that special to predict prices will drop. Again, 50/50 chance of being right.
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RE: Kary L. Krismer @ 99 –
Uh Oh,
You seem to be greatly confused about Real Estate. Maybe it’s the sales person mentality that seems to permeate the Real Estate business these days. Those sales people have always been a minority. Today maybe that dynamic has changed.
People in the Real Estate business do study trends. I know one guy who watches Safeway building permits. He buys properties close to those sites as the permit is applied for. Some times the permit gets quashed, or there is a back lash, but most times he makes money.
Other people buy cash flow. I know a guy who buys around Universities. He has a concentric circle formula. The closer in to the campus the higher the price he will pay. he looks for the ability to add on for increased rental income.
Another guy who I mention a lot in blogs buys only around Green Lake. It’s his thing and be buys and sells well, even in today’s market.
I could go on with examples of land use changes, job center creations, development trends, and community development, but the point is always the same, Real Estate is a rational market.
I sold pre 2007. I bought 2001, 2002, 2003, 2006. My purchases were to be long term holds. The market dictated to sell. I sold, 2005, 2006, 2007. It made sense.
This is why Real Estate is a hedge against inflation. Real Estate is a stable, or was, investment tied to the CPI. The variations of market timing and buying strategies are predictions based on sound research.
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By Kary L. Krismer @ 103:
Can you refresh my memory on when one person, let alone all of us, said that real estate should be bought and sold like real estate. Forgive me for not taking your word for it.
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RE: Kary L. Krismer @ 99 – Kary, you are close to understanding my point, which is that people can think irrationally forever, but there will always be a point where they will no longer be able to act on it. Even if the market has priced them out, that does not mean that they have, as a result, gained reason. I do admire your lack of rigidity though.
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RE: Kary L. Krismer @ 100 – Kary, here is where a pattern comes in, if someone does regularly predict future events, then we might think that they are more than lucky, as with Shiller predicting the dot com bust and the RE bubble. I gotta give it to you that you venture into shark infested waters and hold your own.
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By Gerald @ 105:
I was referring to this whole talk of just walking away because you happen to be underwater at the moment.
Really it is like a stock. The daily variations don’t mean much until you sell. It’s the same with houses. What your house is worth doesn’t really mean much if you don’t plan on selling any time soon.
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RE: shawn @ 107 – I’m not familiar with Case-Shiller predicting the dot-com bust, but they were hardly alone. People predict the demise of just about any stock with a high multiple on a daily basis, at least as long as there are such stocks. People become famous for that largely as a result of luck if one of their predictions becomes timely. I don’t recall the name, but there was one female stock analyst not even in the field of real estate that happened to make a timely negative statement about real estate and became famous for that. If Case-Shiller has two predictions, that makes them one better than most of those famous for making a prediction.
And I’m perhaps not familiar with everything Case-Shiller said about housing–in fact I’m sure I’m not. But of all the people who were negative that I did read, Eleua stands out the most as clearly connecting it as being related to banking, and how it was related to banking, not just simply price movements or price relationships. If there is something Case-Shiller put out on that topic in say 2006-2007, I’d love to see it.
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RE: Kary L. Krismer @ 109 –
I sold my stocks when the monopoly action against Microsoft took shape in 1999. It’s a no brainer. You can not fight city hall.
My houses I sold when the Real Estate market kept spiraling out of control in 2005, 2006, and again in 2007. It’s a no brainer appreciation was 14% and 17%. That is unsubstantiated appreciation by any standard.
What I never saw was the banking issues and financial markets as a whole. My thinking was that on a global scale the economy could expand far beyond where we are today. The paper profit, and collapse of the credit markets never, ever, came into my thinking.
Now that I see it, and according to what I read, we are going back wards from this point forward to those times of at least 1998. I originally figured in an appreciation rate of 4% per year to date, but have since given up that thought.
Rather than us having had inflation all of these years I think that credit has actually boosted the price of goods.
If we do go to a cash economy or shadow economy prices will fall. Housing is just a blip on the screen at this point. If people stop buying with credit, in the case of housing, mortgages, the price of the financing leaves the economy.
If people are really stupid enough to give a bank or lender 20% as a down payment why not have five people combine to pay 100% cash for a house. For cash you can make better deals than going through the mortgage mill. You can buy at auction, buy distressed, buy big, and pay a return on other people’s contributions.
Using Japan as an example they have the regular economy and the shadow cash economy. People combine money all the time and invest as a group. They become the group mentality rather than follow the group.
So in terms of predictions they happen every day. There is logic and reasoning to those predictions.
Can Paul Volker stand up in Congress and say something stupid that will change the face of the economy? Sure. Can Congress file a law suit against Microsoft? Sure. The trick is knowing, waiting. watching, then guessing the out come. In my opinion that defines a prediction.
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By David Losh @ 110:
When you tack on for a few years in a row, I’d agree entirely. If you look at some of the bubble cities, such as Phoenix, their prices almost doubled in less than 3 years, and that was with a ton of construction occurring. That’s just nuts.
That’s why I’ve suggested that the limit a bank (FHA, Freddie, etc.) should loan should be not only a percentage of today’s value, but a lower percentage of maybe 2 years prior. That would limit the upward appreciation in an area by limiting the financing when prices start going out of control due to herd mentality taking over.
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RE: Kary L. Krismer @ 111 –
Makes perfect sense, Kary. It’s actually a great idea.
But it’s just not the American way to prevent people from borrowing way more than they can afford to.
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By David Losh @ 110:
That’s not the way people buy things though, so it will not happen regardless of whether or not it is a good idea. The use of credit is ingrained in society, only a subculture will work in a cash economy.
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By Kary L. Krismer @ 108:
That’s not how an asset is valued. What you paid for something only tells you what it is worth on the purchase date (maybe). If a stock drops 50% the day after you bought it, your purchase price is irrelevant. Your asset is now worth 1/2 of what it was whether you hold or sell. Take GE stock as an example. If you bought in August of last year, you might have paid as much as $30/share. Today, it is worth $12/share. Does the fact that you paid $30/share mean anything to anyone else in the world other than you? The capital tied up in holding the stock is fungible. The question is whether there is a better use of that capital elsewhere. Holding the stock at $12 is no different than making a decision to buy GE at $12 today. If buying it today is not a good decision, then holding it is no better. But choosing to hold it just because you bought it at $30 is irrational.
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By Gerald @ 114:
As is selling it because you bought it at $30.
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[...] This kind of shift will obviously push the median price higher, as it’s essentially just a larger-scale version of the second hypothetical scenario I described above. It goes a long way toward explaining why the median price jumped 4.4% from March to April, but the Case-Shiller index (which uses same-house sale pairs) rose just 0.2%. [...]
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