Let’s check out the three price tiers for the Seattle area, as measured by Case-Shiller. Remember, Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties.
Note that the tiers are determined by sale volume. In other words, 1/3 of all sales fall into each tier. For more details on the tier methodologies, hit the full methodology pdf. Here are the current tier breakpoints:
- Low Tier: < $274,582
- Mid Tier: $274,582 – $404,443
- Hi Tier: > $404,443
The tier breakpoints continued to shift upward ever so slightly in August, rising 0.3% to 0.4% while the overall index rose just 0.1%. This would seem to point to a continuing shift in the sales mix of homes away from the low end toward the high end, which would also help explain why the overall index rose only 0.1% when the low tier rose 0.5%.
First up is the straight graph of the index from January 2000 through August 2009.
The low tier rose 0.5% month-to-month, while the middle tier fell 0.3%, and the high tier was virtually flat. The “rewind” situation held steady again, with low tier sitting about where it was in April 2005 and the middle and the high tiers at May 2005 levels.
Here’s a chart of the year-over-year change in the index from January 2003 through August 2009.
With a month-to-month increase, the low tier’s year-over-year picture improved the most in August. Here’s where the tiers sit YOY as of August – Low: -16.2%, Med: -13.6%, Hi: -14.9%.
Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.
So far I am still pretty unimpressed with this “recovery.” With nearly half a year of flatline prices in Seattle, it is still unclear whether this is the bottom, or merely an extended lull on the way to the real bottom. Personally, my money’s on the latter.
(Home Price Indices, Standard & Poor’s, 10.27.2009)
Rachel » Oct 28, 2009 at 10:06 am
Here’s a personal anecdote that home sales may continue to decline in winter…
Yesterday I found out that my husband I were rejected for a home loan from Bank of America. We were completely shocked because together we make over $100,000; we had 20% down for a $375,000 home; and we have over $150,000 in CD’s, stocks, etc. We also have high credit scores, around 800. The BofA rep told us that we had been rejected b/c BofA, and all of the major banks, changed some of the home loan rules on October 1, 2009, and they now require that each individual on the loan have three open lines of credit. My husband and I each have 1 credit card, which we regularly use and pay off, and we have no other debt.
The catch is that BofA said that even if we got new credit cards immediately, they would not approve us for a loan for AT LEAST 12 months. We are very disappointed b/c we have waited so long for prices to fall, and we thought winter would finally be our time to buy. On top of that, I think this is a stupid policy that will limit home sales and exclude the very people who are responsible enough to have loans. I should stress that my husband and I have GREAT credit scores – and we had been approved by B.of A. for a loan last December.
Peckhammer » Oct 28, 2009 at 10:41 am
“We were completely shocked because together we make over $100,000; we had 20% down for a $375,000 home; and we have over $150,000 in CD’s, stocks, etc.”
I am not picking on you for the above statement, but I have two questions: Are you saying that your net worth is $225,000, and you are planning on using one-third of it for a down payment? If the answer is yes, do you really think you should be buying a $375K house?
Tim » Oct 28, 2009 at 10:41 am
that is the most absurd thing I’ve ever heard. If what you state above is correct, I have a hard time believing that you cannot find an entity to give you a loan.
Rojo » Oct 28, 2009 at 10:50 am
By Peckhammer @ 2:
dude,
stick to the subject in her posting! She is not asking your advice if she should buy or not… She says she has 20% for downpayment. With that, her monthly payment including everything would be 1900 (@5%) – 22% of their gross income. You can buy some decent houses (ok townhouses) in good neighborhoods now!
Rojo » Oct 28, 2009 at 10:53 am
By Tim @ 3:
Never heard of that requirement! It seems they are saying that they’ll loan you money only if you already have 3 other loans! For people’s credit score to be this high doesn’t it mean they have taken credit before and been good with it? Doesn’t seem to make sense.
MEDIC » Oct 28, 2009 at 10:59 am
Yesterday I found out that my husband I were rejected for a home loan from Bank of America. We were completely shocked because together we make over $100,000; we had 20% down for a $375,000 home; and we have over $150,000 in CD’s, stocks, etc. We also have high credit scores, around 800. The BofA rep told us that we had been rejected b/c BofA, and all of the major banks, changed some of the home loan rules on October 1, 2009, and they now require that each individual on the loan have three open lines of credit. My husband and I each have 1 credit card, which we regularly use and pay off, and we have no other debt.
If what you say is the complete story, this is shocking and doesn’t make any sense. Have you confirmed this “3 credit account” rule with other lenders?
This is the first i’ve read anything about this and I spend an enormous amount of time reading and re-searching the housing market.
Anyone in the mortgage industry here able to confirm this rule?
Rachel » Oct 28, 2009 at 11:09 am
Tim @ 3
We just found out about this yesterday, so we haven’t checked with smaller banks yet. Nor have we tried to get an FHA loan. I imagine somebody somewhere will give us a loan, but we don’t think it will be worth it to buy a home if people jack up the interest rates for us b/c they consider us a “credit risk.” The BofA underwriter we spoke to was very apologetic and said it was obvious to her that we could afford a loan, but we just did not meet the new requirments so she had to reject us.
Scotsman » Oct 28, 2009 at 11:19 am
Why would banks want to make the loan against an asset they believe will be decreasing in value, when they can take the same money and get a guaranteed return in 100% safe government securities? This is getting to be a big issue, all kinds of credit drying up because the banks can’t afford any more losses. Banks don’t even want to lend to other banks, because they can’t trust each other to remain solvent. It’s bizarre.
Home sales are down again, by the way. Previous month’s numbers have been “adjusted” down, as has come to be expected. What a farce.
http://www.census.gov/const/newressales.pdf
Ross Jordan » Oct 28, 2009 at 11:19 am
RE: Rachel @ 1 – Go with a different lending institution! Perhaps someone at BAC decided your credit history file was too thin, but I’m pretty confident most brokers could get you a loan (and probably at a lower rate than BAC).
Ray Pepper » Oct 28, 2009 at 11:23 am
RE: Rachel @ 1 –
Problem # 1 ….Bank of America. They have been a nightmare for so many reasons in the last 6 months. I strongly urge you to call Westwood Mortgage in Seattle. Ask for Tom Schwab.
There is no better Mtg Rep in the State.
Kary L. Krismer » Oct 28, 2009 at 11:27 am
RE: Rachel @ 1 – I assume you’re dealing with a bank directly. If you need the name of a loan broker, email me.
BTW, I’ve always said credit scores are a bad way to judge home loan qualifications. I think this is something else (verifying the entity), but with too few of credit accounts you will have a lower credit score, which is nuts when it comes to granting a home mortgage.
patient » Oct 28, 2009 at 1:53 pm
RE: Scotsman @ 8 – That’s right Scotsman, Benrnake has created the ultimate bailout machine or theft machine if you prefer. He lends the bank say $1b at nearly 0% interest rate then the bank lends it back to the FED thorugh buying treasuries at a much higher interest rate, and the cycle is just repeated over and over again. The same $1b circulates between them building the loan amount with $1b every time. The gap between interest rates is pure profit for the bank and pure loss for the FED. Who ultimately funds the FED? that’s right you and me the tax payer. The cool thing is that it doesn’t require any votes in the senate and people on the sreet will never know that they are being robbed. Disgusting? Yes, but it is simple and effective. I don’t like it one bit but it’s clever in it’s simplicity and low political risk/exposure.
Jonness » Oct 28, 2009 at 9:29 pm
RE: Rachel @ 1 –
You can’t expect a bank to shoulder the risk that the house you want to buy isn’t going to drastically decrease in value so far that even a person with your impeccable credit record wouldn’t choose to default on the loan. If I had the money, I wouldn’t loan it to you either. I don’t care how good your credit score is. Buying a house right now represents an enormous risk, and the banks are smart to not take that on when other ways to profit are far less risky. This same phenomenon happened in Japan when its bubble burst, so it really shouldn’t surprise anyone. It lasted for over 15 years as house prices continued to fall. Meanwhile the Japanese RE industry assured the public, on a monthly basis, that the bottom was in.
However, f you want to risk your money buying a home right now, the government is on your side. It wants you to shoulder the burden of responsibility that the banks don’t want to take on. Otherwise, the entire system will collapse. So pick up an FHA loan or a government backed conventional. You won’t take a hit on rates, because there is no risk to the banks.
Keep in mind, Seattle median house prices are currently about 5x median household incomes. Back in the 90’s they averaged about 3.5x. It really makes you wonder if a home is worth 5x during a time when unemployment is near double digits. Then again, the govt. has blown trillions of dollars in an effort to prop up house prices above legitimate market supported levels, so I’m not surprised we’re currently at 5x.
My tip is, don’t listen to a single RE agent about where prices are headed. Don’t listen to me either. Do your own research, and come to your own conclusions. After all, it’s your money that’s on the line.
Best wishes.
Ira Sacharoff » Oct 28, 2009 at 9:43 pm
“My tip is, don’t listen to a single RE agent about where prices are headed”
It’s true. Only the married RE agents know where prices are headed.
Rachel » Oct 28, 2009 at 10:00 pm
Thanks everyone for the comments and advice. We called ING today, but they also had the three credit line requirement. Apparently, BECU does not have this requirement, so we may go with them.
Scotsman » Oct 28, 2009 at 10:19 pm
RE: Ira Sacharoff @ 14 –
I’ll bet you drove your mother nuts when you were little..
Jillayne » Oct 28, 2009 at 10:30 pm
Hi Rachel,
I was with a group of loan originator (LO) students today when I read your comment so I asked the group to confirm the 3 trade line requirement. They all said that yes, this is very common now with all the major banks and lenders, even with an 800 credit score and 20% down. These students are all LOs working under a mortgage broker. The theory behind the requirement is the bank/lender can’t get a sense of how you use credit unless they can see a credit history that includes depth and breadth so if all you have is one line, you appear to be a higher risk borrower on paper.
If BECU will take you, fantastic. You could also ask your loan originator to broker your file to a local, portfolio lender.
Also, just an FYI, if you are switching lenders the first lender is required under two federal and one state law to provide you with a copy of your credit report, title report, and appraisal within 5 days of you submitting a written request in order to take these to the new lender. If you need to hammer them with the names of the laws, let me know and I’ll give them to you. (Not doing this is a common violation in WA State.)
Kevin » Oct 29, 2009 at 4:10 am
Anyone’s thoughts on the 8K credit being extended & expanded?
Jonness » Oct 29, 2009 at 8:38 pm
By Kevin @ 18:
My opinion is just one in a sea of never ending opinions, so take it with a grain of salt. The government has pumped trillions of dollars into propping up house prices above fair market levels. In short, it’s performing the most massive asset price fixing scheme in U.S. financial history. If it weren’t the government doing it, it would be downright illegal.
For better or worse, to have come this far and give up now is not the American way. Since government spending typically creates less than 1:1 velocity, I fail to see why Uncle Sam won’t throw a few billion more in the pot for an extended stimulus. Why spend trillions to fix the market and then let it tank over a few billion dollars easily borrowed from future growth?
The flip side of that argument is the public is growing extremely weary of the debt, and the tax credit is highly visual. I think the first argument is stronger though.
Jonness » Oct 29, 2009 at 8:43 pm
RE: Jillayne @ 17 –
Does 3 open lines of credit mean a base amount of unborrowed money you can borrow against at will? IOW, a car loan, student loan, etc. doesn’t qualify toward meeting the minimum 3 open lines of credit? And a home equity line of credit and/or a credit card do?
On another note, the ongoing credit contraction is just amazing. It’s like waking up and realizing you’re in Japan early on in the lost decade.