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.

52 responses to “Case-Shiller: Seattle Home Prices Bump Up Slightly Again in June”

  1. Lamont

    well, it does look like the y-o-y declines are bottoming across the housing markets.

    probably too soon to call it for seattle, but a lot of the other cities are showing encouraging signs that the worst off the declines is over.

    by next year, some cities may have actually gotten close to or crossed the zero line and may have actually put in a bottom this upcoming winter.

    we’re still talking about june numbers, though, and those are some of the strongest and aren’t going to be reflecting conditions as we go into september and the oxygen goes out of the housing market.

    Rate this comment: Thumb up 0

  2. lu

    Dead cat bounce. Price to rent will go down. Keep renting.

    Rate this comment: Thumb up 0

  3. Dave Anderson

    I’m disturbed, because there’s a nationwide “bottom” in prices that looks unreal.

    I’ve plotted all the cities month-over-month over several year’s time, and with few exceptions, each city’s curve suddenly bottoms in March 2009, and abruptly changes direction. Since it is still essentially true that “real estate is local”, what could cause every city to suddenly and simultaneously reach an equilibrium point where prices reversed course?

    Answer: it just so happens that the home buyers’ tax credit was enacted with the American Reinvestment act (stimulus package) effective February 17, 2009. March 2009 was the first full month that American home buyers had the tax credit as an incentive. It changed their behavior and made them buy homes. It also expires in December 1, 2009 unless it is extended.

    Once again, government policy is impacting asset valuations. Either we’re seeing a lasting nationwide housing bottom marked by an extraordinarily well-timed tax incentive, or a new “bubblet.” Case Shiller won’t tell us which until 2010.

    Rate this comment: Thumb up 0

  4. ray pepper

    Don’t fight the FED! Many more programs to be rolling out to absorb homes, appliances, and energy efficient LCD’s??…….However, foreclosures and shortsales will continue relentlessly keeping a LID on any appreciation.

    Rate this comment: Thumb up 0

  5. Kary L. Krismer

    From main piece: “The dramatic swing in the NWMLS data from down nearly 5% in March to up over 3% in June that had some people shouting about a bottom in home prices is non-existent in the Case-Shiller data. NWMLS March to June: +8.6% ($31,150). Case-Shiller March to June: +0.3%. This stark difference can most likely be attributed to a shifting geographic and sale tier mix, and is an excellent example of why the Case-Shiller data provides us a better picture of what’s really going on with home prices in the last few months.”

    Not quite so fast. You’re comparing apples and oranges. Try the same calculations with 3 month moving averages of the NWMLS median so that the comparison is the same (since C-S uses a 3 month average). Most of what you’re showing is the difference between using a moving average and not.

    Here are those numbers:

    393666.67 January 2009
    387000
    373783.33
    372950
    372950
    383333.33 June 2009

    Your June NWML data is above January, but if you apply a 3 month average it’s below, as is C-S (although the amounts are not the same).

    Rate this comment: Thumb up 0

  6. Kary L. Krismer

    My initial reaction on hearing this news was of course it’s a four month high–it’s June! But note that June 2008 was not higher than any of the four months preceding (second to last graph).

    Also note how crazy 2007 was. Up over 4% in 5 months using a 3 month moving average (same graph).

    Rate this comment: Thumb up 0

  7. Kary L. Krismer

    RE: The Tim @ 7 – True, but a lot different than the graph you did. And remember, C-S is three counties and these numbers just King. So that could account for at least part of the difference.

    Rate this comment: Thumb up 0

  8. kfhoz

    By The Tim @ 7:

    That still puts June 2.6% higher than March, vs. a 0.3% change in the Case-Shiller index. That’s a few orders of magnitude different.

    Actually 2.6% is about one order of magnitude larger than 0.3%. But an order of magnitude is huge, about one thousand percent.

    Rate this comment: Thumb up 0

  9. Kary L. Krismer

    RE: kfhoz @ 9 – I guess you do learn something new every day. I had no idea that was a term of art.

    http://en.wikipedia.org/wiki/Order_of_magnitude

    Rate this comment: Thumb up 0

  10. Scotsman

    The optimist in me looks at the charts/graphs and thinks yup, the bottom is in! Sometimes it’s good to be wrong.

    Then the realist in me wakes up, smacks the optimist around a bit, shows him some additional data, and the internal conflict is resolved:

    DEAD CAT BOUNCE

    Even the whitehouse agrees:

    http://news.yahoo.com/s/ap/20090825/ap_on_go_pr_wh/us_obama_economy_5

    Rate this comment: Thumb up 0

  11. one eyed man

    RE: Scotsman @ 11

    Wife: “Smells like a dead cat in here.”

    Husband: “That’s because it’s Dead Cat Soap. There’s a dead cat in every bar.”

    (Poorly paraphrased from old Fire Sign Theatre)

    The cat may be dead, but it’s still probably evidence of progress in the ongoing rendering process needed to clean up the economy and the housing market. Maybe next springs numbers will have a little better smell to them. The real test will be whether Ben is right and we don’t need to devalue the dollar further to stem significant future deflation. I know you, Sniglet and others still think the Fed doesn’t have the fire power to quell deflationary forces. I may not be right, but I think we’ll continue to have a weak dollar if needed to fight deflation.

    Query: Is it better for the country as a whole to be poorer because their real estate is worth less or because their currency is worth less. The country will loose wealth one way or the other. But I think a weak dollar to fight deflation will mean more jobs at home in the long run.

    Rate this comment: Thumb up 0

  12. Dave0

    the four month flat-line of the CS index seems promising that this may be the bottom. However, 2008 had the same 4 months flat-line this time of year and proceeded to drop like a rock after the strong spring season. When the index is flat-lining during the slow season then I’ll believe it’s the bottom. Flat prices during the strongest part of the year is not a healthy market. Give it 6 more months or so and we’ll find out.

    Rate this comment: Thumb up 0

  13. Groundhogday

    Calculated Risk has been blogging on the bounce for some time now:

    1) Various mortgage modification programs have slowed the release of foreclosures into the market. (supply is down in many markets)
    2) tax credit has increased demand
    3) there really WAS a segment of society that had held off buying for years and could finally afford to purchase something (first time home buyers dominate the market)
    4) seasonal bounce

    As CR points out:
    1) we are likely to see a MAJOR drop in buyer activity at the end of 2009.
    2) The $8k will likely be extended but will not have the same stimulative effect. By Nov. 1st time potential buyers will largely have purchased, and to continue INCREASING home prices will require an increasing credit. To maintain the effect the credit will have to be increased (e.g. $15k) and/or expanded (all home purchases). The drug addiction analogy works great here.
    3) The drop in buyer activity will probably coincide with a major REO surge.

    Early 2010 should be interesting…

    Rate this comment: Thumb up 0

  14. mark

    RE: Dave Anderson @ 3
    In March the Federal Reserve also announced that they would buy and additional $200 Billion in agency debt, $750 Billion in MBS securities, that is on top of the $500 Billion that they had also announced they were going to buy. At that time they also announced that they would be buying $300 Billion in Treasurys. Throw in the $8K tax credit and the federal governments $1.6 Trillion dollar deficit for the year and you’ve got a lot of firepower being deployed to prop up the markets.

    And what did we get for this shock and awe campaign?

    Flat to slightly rising prices for a few months.

    Rate this comment: Thumb up 0

  15. Kary L. Krismer

    By Dave0 @ 13:

    the four month flat-line of the CS index seems promising that this may be the bottom. However, 2008 had the same 4 months flat-line this time of year and proceeded to drop like a rock after the strong spring season. When the index is flat-lining during the slow season then I’ll believe it’s the bottom. Flat prices during the strongest part of the year is not a healthy market. Give it 6 more months or so and we’ll find out.

    I’d agree 4 months is not evidence of a bottom, but the drop you’re referencing is due to Paulson letting us know that the economy was on the verge of total collapse.

    In the past I’ve openly wondered what the news will be this year. August 2007 it was the mortgage mess, September 2008 it was Paulson’s mess. We’re due right about now! ;-)

    Rate this comment: Thumb up 0

  16. Indy

    RE: Kary L. Krismer @ 16 – The Commercial Real Estate Mess

    Rate this comment: Thumb up 0

  17. Scotsman

    RE: one eyed man @ 12

    Good to see ya, One Eye!

    I don’t have as much faith in the power of a devalued dollar as some. Folks expect it will lead to a resurgent economy as the world beats a path to our door, hoping to buy high quality American goods and services at bargain prices. The problem is we don’t have those things here- we buy them from Europe and Asia. And truth be told, while America is in a mess, the rest of the world is pretty well screwed over too- GB is clearly worse off than we are, China is walking a political tight-rope between economic stability and political collapse, etc. Just how much buying are they going to be able to do? Australia has those kangaroos, so they’re OK, but they’re about the only ones. And they aren’t big enough to save the world.

    An additional downside to a weak dollar is oil and energy. Sure, the dollar is down and American goods are cheap- until we have the pay the higher energy costs to produce and transport them. Seems like a wash to me.

    One final factor to consider is time. How long would it take for us to transform from a consuming country to a producing country? Are Americans willing to do production jobs for lower wages, competing with India and Asia? What happens to the debt, both personal and governmental? It still has to be cleared, no matter which way we go, and that seems like the dominant issue to me.

    Rate this comment: Thumb up 0

  18. Scotsman

    RE: Indy @ 17

    And the pensions that soon won’t exist. More future consumption quashed.

    Rate this comment: Thumb up 0

  19. patient

    The human tendency to be an optimism never ceases to surprise.

    Take out seasonality from the data and what are we left with?
    That’s right: one of the biggest price drop in modern history: -16.1% YoY.

    Bottom calling can at best be called premature.

    Rate this comment: Thumb up 0

  20. Kary L. Krismer

    RE: Scotsman @ 19 – That would be more likely. I doubt the average person would care about commercial lending unless it meant their shopping mall actually closed it’s doors.

    Rate this comment: Thumb up 0

  21. Fran Tarkenton

    RE: Kary L. Krismer @ 5

    Not quite so fast yourself. You were in favor of directly comparing C-S to NWMLS median before you just decided that you were against it.

    “But for those of you who think C-S is somehow better, the difference between the NMWLS King County SFR median from peak and C-S three county from peak is very tiny. Case-Shiller is .774 of peak and NWMLS is .78 of peak, a difference of .006.”

    http://seattlebubble.com/blog/2009/07/28/case-shiller-spring-home-price-bounce-erased-in-may/#comment-79180

    Rate this comment: Thumb up 0

  22. Acerun

    When talking about a bottom of home prices there is a major wild card that is going to impact prices. When will interest rates rise. They will have to at some point in the not so distant future. This will have to put downward pressure on home prices.

    Rate this comment: Thumb up 0

  23. Kary L. Krismer

    RE: Fran Tarkenton @ 22 – That’s true, but it’s because I have the 3 month moving NWMLS number in a different spreadsheet than C-S, and I’m too lazy to change it. I would actually prefer to track the 3 month average to C-S.

    I think I have said the the NWMLS median is more volatile, and that the largest spreads are when prices are changing rapidly. So I have addressed the differences at times.

    But my point was that Tim’s reasons for the differences were overlooking one major difference.

    Rate this comment: Thumb up 0

  24. Kary L. Krismer

    RE: Acerun @ 23 – Downward pressure, yes, but that doesn’t mean prices will go down. They didn’t go down locally in the late 70s, early 80s where the high interest rates were the result of high inflation.

    Rate this comment: Thumb up 0

  25. Acerun

    I would say that the housing market was in a different state back then. I suppose only time will tell.

    Rate this comment: Thumb up 0

  26. David Losh

    RE: Kary L. Krismer @ 21

    It’s the paper that commercial lending carries. It is short term. The mortgage may be amortized over thirty years with a balloon in five, seven, ten, and fifteen years. When those Notes become due and payable there will be no market. The defaults should already be starting, but for sure in 2012 we will see a massive uptick in commercial mortgage defaults.

    Rate this comment: Thumb up 0

  27. David Losh

    RE: Kary L. Krismer @ 25

    Holy Cow Kary,

    In the late 1970s and early 1980s prices may have been inflating, but no one paid retail. Prices were much less and closer to a cash price. Today, with overly inflated house prices, the pressure will drop pricing like a rock.

    Rate this comment: Thumb up 0

  28. CCG

    RE: lu @ 2

    Yep. Let’s see prices turn up WITHOUT unsustainable Soviet-level government intervention, and then we’ll talk about a bottom.

    Rate this comment: Thumb up 0

  29. CCG

    RE: Dave Anderson @ 3

    March 2009 was also when Comrade Chairman Bernanke started his “quantitative easing” policy – i.e. print money to drive equities up and yields (and thus mortgage rates) down. The stock market hockey stick dates back to that time as well. It’s going to take something far worse than the 2008 crash to kill the asset inflation mania that grips the world.

    Rate this comment: Thumb up 0

  30. Scotsman

    RE: Kary L. Krismer @ 25

    The key here is that, as you say, “high interest rates were the result of high inflation.” Inflation expectations were built into the entire economy- wages went up, houses went up, everything was affected.

    Now, you’re lucky to have a job, wages are flat, very few still expect rising home values to bail them out of an initially tight housing payment. In this environment if rates jump, as they eventually will, housing prices and demand will certainly feel a significant impact. I would expect the net cost effect of any increase in interest rates to be immediately deducted from the home’s value.

    Rate this comment: Thumb up 0

  31. Kary L. Krismer

    RE: David Losh @ 27 – Yes, I realize that, and I think we’ve already seen some defaults locally of companies with multi-state holdings. I’d name shopping centers, but I’d hate to accidentally identify the wrong one.

    Rate this comment: Thumb up 0

  32. Kary L. Krismer

    RE: Scotsman @ 31 – Yep, I’d agree with that assessment.

    One of the earliest bankruptcy cases I worked on, the debtor ran a ponzi scheme, and he offered to borrow money at 24%. If you could find someone willing to loan him money at 18%, he’d pay you the difference for as long as the money was outstanding. Some people had loaned him over $1,000,000.00, and some large lenders like that just let the interest accrue!

    Rate this comment: Thumb up 0

  33. David Losh

    RE: Kary L. Krismer @ 32RE: Kary L. Krismer @ 33

    You have gotten to be very agreeable lately.

    Rate this comment: Thumb up 0

  34. Jonness

    By Kary L. Krismer @ 25:

    RE: Acerun @ 23 – Downward pressure, yes, but that doesn’t mean prices will go down. They didn’t go down locally in the late 70s, early 80s where the high interest rates were the result of high inflation.

    But for some of us, sideways is excellent because we continue to save cash while house prices stagnate. What really sucks is attempting to save money against a rising leveraged asset.

    Rate this comment: Thumb up 0

  35. Jonness

    By Acerun @ 26:

    I would say that the housing market was in a different state back then. I suppose only time will tell.

    I agree. However, I imagine Seattle house prices declined a fair amount between 1979 and 1984 when adjusted for inflation.

    Rate this comment: Thumb up 0

  36. Kary L. Krismer

    By Jonness @ 36:

    By Acerun @ 26:
    I would say that the housing market was in a different state back then. I suppose only time will tell.

    I agree. However, I imagine Seattle house prices declined a fair amount between 1979 and 1984 when adjusted for inflation.

    Even assuming they did, would it matter? If you owned a house, it would be good it went up. If it was leveraged (you owed money on it), even better.

    If you started 1979 with $10,000 equity, and ended up with $100,000 equity, you clearly would have beat inflation.

    Rate this comment: Thumb up 0

  37. Kary L. Krismer

    Wow, King 5 news really is run by morons. They reported that C-S showed prices dropped in June, but less than in May, citing the YOY figures. Then they reported national prices increased, citing the May to June figures.

    Rate this comment: Thumb up 0

  38. Kary L. Krismer

    But not 16+ percent, which is what they reported.

    Rate this comment: Thumb up 0

  39. Jonness

    RE: Kary L. Krismer @ 38 – It depends if prices were going up or holding flat. If they were holding flat, you were losing money, because you could have earned interest on it in the high-interest environment and then put it into the house at the tail end of the flat line.

    But if prices were rising at a good pace, during that period, it would have been a good time to get some leverage going early, as you have pointed out. However, If you bought with cash, as David said was not unusual back then, unless the prices rose faster than other investments, you lost money.

    So I think it depends on a lot, and I haven’t seen the actual data, so I can’t really say if it was a good thing or not. I suspect the prices were flat to slightly rising.

    The reason why I think it’s an extremely poor time for many people to buy right now is because foreclosures are continuing to set new record highs, and the only part of the market that’s gaining is propped up with tax rebates and govt (FHA) subprime loans. For those of us who are looking to buy non-starter homes, I feel buying is a very poor decision. Prime loan defaults have overtaken subprime defaults, and a market has an extremely telling distrubution pattern. In short, prices for the kinds of houses I’m looking to buy are going to collapse. Here are the latest sales numbers from NAR. I think we can all agree this is not a healthy housing market.

    U.S. Existing Home Sales Yr/Yr
    $0 – $100,000 Up 38.8%
    100,000 – $250,000 Up 8.7%
    $250,000 – $500,000 Down 6.2%
    $500,000 – $750,000 Down 8.9%
    $750,000 – $1,000,000 Down 10.6%
    $1,000,000 – $2,000,000 Down 23.3%
    $2,000,000 + Down 32.4%
    Source: National Association of Realtors

    Rate this comment: Thumb up 0

  40. Jonness

    I went looking to see if I could find the historical OFHOE Seattle prices for the 80’s inflation period and found a really cool website. Check this out:

    http://www.zoyzoy.com/realestate/caseshiller.php

    Rate this comment: Thumb up 0

  41. David Losh

    2009 and 2010 will continue a gradual decline in pricing. 2011 and 2012 will be more dramatic. The rise in interest rates to attract investment dollars will fizzle and only add to price declines. What will be hard is all of the properties that will owe more than the value.

    Some program of principle reduction will be needed.

    There is a theory of low interest loans to throw at principle to get them to reduce faster. What i really think is that we will see more blind escrow accounts where the original note holder stays on title, the buyer with 20% will put 10% towards closing and 10% directly to principle reduction. The new blind escrow will be open for five or seven or ten years then cashed out with a refinance.

    Rate this comment: Thumb up 0

  42. Jonness

    While looking at the Case-Shiller data from the link I posted, I noticed when house prices get out of whack, the low, mid, and high tiers diverge. As the market gains health, the tiers come closer together, and when the market becomes affordable again, the tiers come together as one. Well, that’s the past pattern anyways.

    Rate this comment: Thumb up 0

  43. Kary L. Krismer

    RE: Jonness @ 43 – I wasn’t an agent back then, but I don’t think cash was that common back then. And contrary to what a lot of people think, you didn’t need 20% down back then either. They had PMI.

    Seller financing was more common back then, in part because due on sale clauses were not enforceable, so the seller could finance a second.

    Rate this comment: Thumb up 0

  44. Groundhogday

    By Indy @ 17:

    RE: Kary L. Krismer @ 16 – The Commercial Real Estate Mess

    Yep.

    Rate this comment: Thumb up 0

  45. Kary L. Krismer

    RE: Groundhogday @ 48 – Maybe it will be the Swine Flu! Something like that could really slow down the economy, at least temporarily. August 2007′ September 2008; October 2009–the beginning of flu season.

    Rate this comment: Thumb up 0

  46. Dash Pointer

    Am I actually seeing that Seattle is off-peak as much as 15%? And that’s no doubt an average.
    This little blip upwards is no doubt fueled in many markets by foreclosure speculation–good luck finding a “greater fool” out there.

    Rate this comment: Thumb up 0

  47. amarjit sandhu

    At the low end homes, I have started seeing mulitple offers. Not sure because of good deals or agents low balling listing prices to incite competition.

    Rate this comment: Thumb up 0

  48. Shadow Inventory Gut Feelings, Rumors, & Anecdotes • Seattle Bubble

    […] a month in the years before the housing bubble burst to over 1,600 in a single month in 2009, when home prices were falling over 16% year-over-year. That’s a peak level four times higher than the highest level ever recorded before 2007 and […]

    Rate this comment: Thumb up 0

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Please read the rules before posting a comment.

You have 4 comments remaining on this post.

Archives

Find us on Google+