Case-Shiller Tiers: All Three Tiers Turn Negative

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: < $270,312
  • Mid Tier: $270,312 – $402,072
  • Hi Tier: > $402,072

The breakpoints for the tiers fell again in November, declining 0.6 to 1.1%.

First up is the straight graph of the index from January 2000 through November 2009.

Case-Shiller Tiered Index - Seattle

The low tier fell 0.1% month-to-month, the middle tier fell 0.3%, and the high tier dropped 0.6%. The high tier hit a new post-peak low, while the low and middle tiers both sit slightly higher than where they were earlier in the year.

Here’s a chart of the year-over-year change in the index from January 2003 through November 2009.

Case-Shiller HPI - YOY Change in Seattle Tiers

The year-over-year situation improved slightly again in all three tiers. Here’s where the tiers sit YOY as of October – Low: -11.1%, Med: -9.5%, Hi: -11.2%.

Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.

Case-Shiller: Decline from Peak - Seattle Tiers

Bouncing along the government-sponsored floor, but for how long…

(Home Price Indices, Standard & Poor’s, 01.26.2010)


About 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.

13 comments:

  1. 1

    Thers’s Two Camps on Predicting a 2010 End to Real Estate Stimulus Bailouts

    Scotsman and I see an end to real estate stimulus debt add-ons after this last one expires Apr 2010. I see this happenning because Obama knows the voter backlash on continued uncontrolled deficit spending will kill the Democrat politicians’ chances. Scotsman has some very savvy economic reasons tied to fiscal borrowing limits; that were contradicted/bailed out by printing more money last year….but that was before the Asian banks went completely zombie on us….a big difference IMO. The real estate debt party is over, unless you want a Republican president next term.

  2. 2
    shawn says:

    An article I read this morning was interesting:
    http://articles.moneycentral.msn.com/Banking/HomeFinancing/a-recession-divorce-no-one-wants-the-house.aspx?GT1=33006

    On the topic, I do wonder if any more stimulus will be put into real estate? I wonder what others think, except Scotsman, as SWE already laid out Scotsman’s views on this topic.

  3. 3
    Researcher says:

    I think economist Michael Hudson completely NAILS IT with this article from yesterday —

    Which Economy is Obama Talking About? Myths of Recovery
    http://www.michael-hudson.com/articles/financial/100126MythsOfRecovery.html

    SOME SNIPPETS:

    “We are not really emerging from a “recession.” The word means literally a falling below a trend line. The economy cannot “recover” its past exponential growth, because it was not really normal. GDP is rising mainly for the FIRE sector – finance, insurance and real estate – not the “real economy.” Financial and corporate managers are paying themselves more for their success in paying their employees less.”

    “The economy is best viewed as the FIRE sector wrapped around the production and consumption core, extracting financial and rent charges that are not technologically or economically necessary costs.”

    “The financial and property sector is wrapped around this core, siphoning off revenue from this circular flow. This FIRE sector is extractive. Its revenue takes the form of what classical economists called “economic rent,” a broad category that includes interest, monopoly super-profits (price gouging) and land rent, as well as “capital” gains. (These are mainly land-price gains and stock-market gains, not gains from industrial capital as such.) Economic rent and capital gains are income without a corresponding necessary cost of production (M – M’ to the initiated).”

    “Banks have lent increasingly to buy up these rentier rights to extract interest, and less and less to promote industrial capital formation. Wealth creation” FIRE-style consists most easily of privatizing the public domain and erecting tollbooths to charge access fees for basic necessities such as health insurance, land sites, home ownership, the communication spectrum (cable and phone rights), patent medicine, water and electricity, and other public utilities, including the use of convenient money (credit cards), or the credit needed to get by. This kind of wealth is not what Adam Smith described in The Wealth of Nations. It is a form of overhead, not a means of production. The revenue it extracts is a zero-sum economic activity, meaning that one party’s gain (that of Wall Street usually) is another’s loss.”

    Again, Hudson NAILS IT straight to the cross and then burns it to the ground with UFOs hovering overhead and Hendrix on a white stallion blowing smoke rings toward Hudson’s halo.

  4. 4
    AMS says:

    RE: Researcher @ 3 – The US produces a lot of financial instruments, including so many derivatives. I’ve asked the basic question: How many derivatives does this world need?

    We all know that if you chop a bad loan into 1,000 pieces, no one is taking a big risk, it’s not really that bad. That’s individual play using CAPM at its best. Sure on the macro level all 1,000 pieces are bad, but who invests on the macro level?

  5. 5

    RE: shawn @ 2

    Great Article Shawn

    Back in 2005 it was true too. A South Seattle couple I knew divorced and neither could buy the other out on a $300K home [BTW, the custodial parent get’s the house, but the payments and taxes too; while the non-custodial parent owns 30-50% of it too]. I suggested they sell the house [back then it made sense or was possible, no 25-30% of them upside down loans like today] and buy two condos….both parents acted like little kids, telling me no, the kids had roots and needed the backyard, yadda, yadda….

    I bet they wish they took my advice today, if they were lucky, a pending foreclosure made it for them.

  6. 6

    RE: AMS @ 4

    Yes AMS

    I was reading in Wired magazine that America is in a new industrial revolution, where all we need to do is invent in our garages [kind of like Bill Gates] and have the Chinese make it for us.

    Sounds good for the inventor, but China gets the 100-500 employees per invention and we get 1 [the inventor]…..sounds possibly workable if we get America’s population down to 100,000….LOL

    I’m letting that rag of a magazine expire and won’t renew…LOL

  7. 7
    CCG says:

    Somebody actually says it:

    http://blogs.wsj.com/developments/2010/01/26/dean-baker-were-still-in-a-housing-bubble/
    “Dean Baker: We’re Still In a Housing Bubble”

    Meanwhile, in bull land:
    http://blogs.wsj.com/developments/2010/01/22/why-you-can-yawn-over-mondays-home-sales-shock/

    “Memo for Monday morning: Don’t get excited.

    The National Association of Realtors is due to release its monthly report on existing home sales at 10 a.m. Monday, and it’s likely to look lousy. (What’s with this “existing” home sales bit? New homes don’t exist? Let’s call it home resales.) Analysts are predicting a sharp drop from November’s level. The knee-jerk reaction probably will be: Oh, no, the housing market is in free fall again!

    In reality, housing stats tend to bounce around erratically from month to month, and one month’s numbers rarely mean much.

    November got a boost from people rushing to qualify for a tax credit on home purchases that was expected to expire at the end of that month. Now the credit has been extended till April 30, so there’s less urgency. Tax credits are becoming about as novel as going-out-of-business sales at Persian rug stores. Still, we may well get another spike in home sales near the next expiry date.

    [repeat of the statistics, plus filler]

    So get over it. In advance.

    Where to turn for real guidance on the outlook for housing? Watch the trends in job creation (or destruction) and mortgage delinquencies over the next few months for clues.”

    Those are indeed likely to be helpful, though I have no idea why he thinks they’re going to support the bull case (as is implied by their mere inclusion in this preemptive apology).

    This is of course the most popular article on WSJ, although if the comments are any indication, that might be out of mockery. We’re a long ways from the bottom.

  8. 8
    Flying Ape says:

    RE: shawn @ 2
    I wouldn’t be surprised if stimulus moves from the demand side to some sort of supply side program to prevent new homes to hit an anemic market. Short term cap gains tax? Maybe FHA/FNMA penalties for paying off mortgages too early to target speculators/flippers?

    The “fake” expirations of the 1st time credit pulled in future demand and as recent data shows the effects have waned so there isn’t much demand left. So the credit will expire but come on do you really think the low mortgage rate program will expire? Will probably be extended by the Fed if QE 2.0 is introduced or handed off to some other agency. They will keep it low enough so resetting ARMS can refinance and avoid hitting the market. Its just another “fake” expiration to entice buyers sitting on the fence. Rates probably inch up but just enough so the 2nd leg down isn’t precipitous.

  9. 9
    Lake Hills Renter says:

    Re: Wired News

    Their Threat Level blog is a good read for my fellow libertarians out there, but overall the site’s not nearly as good as it used to be. They used to have some quality reporting, and now it’s mostly Apple/Google crushes and wannabe reporting.

  10. 10
    Researcher says:

    RE: AMS @ 4

    I’m not sure I follow your line of thinking. Your post makes no sense to me. Did you read the same article I did?

  11. 11
    Hugh Dominic says:

    The Tim, are you being intentionally hypocritical with these headlines? Prices have basically been flat for eight months, but your headlines tout “new lows” as if prices were plunging. At best, you are mocking industry rags that do the same on the positive side. But at worst you’re no better than they are.

  12. 12
    whatsmyname says:

    Tim, thanks for the straight CSI index graph. (Yes, I know you do it every month). Would it be possible to provide comparison/contrast by showing a cumulative CPI line?

  13. 13
    AMS says:

    RE: Researcher @ 10 – Let’s start with this line:

    “GDP is rising mainly for the FIRE sector – finance, insurance and real estate – not the ‘real economy.'”

    Over the past few years, US finance has produced many so many instruments. Where else in the world do we find all of the financial instruments being produced? South Africa might have gold and diamonds, the middle east might have oil, China might have labor, but we can crank out plenty of financial instruments!

    With that in mind, how many financial instruments does the world need?

    Also I am a fan of Adam Smith’s work. While we could apply Smith’s work to financial instruments, where the US has developed very efficient assembly lines, the underlying question remains: Does it really add value to the economy?

    CAPM diversification is good against individual entity risk. The idea that you spread your risk out over 1,000 entities/persons is fine, so long as there is not a systematic failure.

    In summary, there are two problems:

    1. Does the world need all these complex financial instruments?
    2. How can one avoid systematic risk?

    The everlasting quest for the above-average risk-free return continues.

    All that said, rather than consider all these complexities, let’s just look at the population. What’s going to happen when the boomers retire? Are complex financial instruments the savior?

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