Case-Shiller: Seattle’s Home Price Double-Dip Begins

Let’s have a look at the latest data from the Case-Shiller Home Price Index. According to August data,

Down 0.8% July to August.
Down 2.4% YOY.
Down 24.1% from the July 2007 peak

Last year prices rose 0.1% from June to July and year-over-year prices were down 14.7%.

Since August’s data is a 3-month average that still includes June (the final tax credit month), I’m surprised to see the index fall as much as it did. It is also interesting to note that this is the first large (>0.5% points) deterioration we’ve seen in Seattle’s YOY data since April 2009.

Here’s an interactive graph of the year-over-year change in all twenty Case-Shiller-tracked cities, courtesy of Tableau Software (check and un-check the boxes on the right):

Seven of twenty Case-Shiller-tracked cities are now in positive YOY territory (down from ten last month): Phoenix, Los Angeles, San Diego, San Francisco, Washington DC, Boston, and Minneapolis. The three cities that dropped from YOY positive to YOY negative in August were: Miami, Detroit, and New York. Only Charlotte, Las Vegas, and Cleveland saw their respective YOY numbers move in the positive direction.

In August, fifteen of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops (or saw year-over-year increases) than Seattle (the same number as July):

  • San Francisco at +7.8%
  • San Diego at +6.9%
  • Los Angeles at +5.4%
  • Washington, DC at +4.8%
  • Minneapolis at +2.9%
  • Boston at +1.5%
  • Phoenix at +0.4%
  • Detroit at -0.1%
  • New York at -0.1%
  • Cleveland at -0.4%
  • Miami at -1.0%
  • Denver at -1.2%
  • Dallas at -1.7%
  • Atlanta at -2.0%
  • Portland at -2.3%

Falling faster than Seattle as of August: Chicago, Charlotte, Tampa, and Las Vegas.

Hit the jump for the rest of our monthly Case-Shiller charts, including another interactive charts of the raw data and our monthly offset graph.

Here’s our offset graph—the same graph we post every month—with L.A. & San Diego time-shifted from Seattle & Portland by 17 months. All four cities turned down even more sharply on this chart in July. Year-over-year, Portland came in at -2.3, Los Angeles at +5.4%, and San Diego at +6.9%.

Case-Shiller HPI: West Coast

Note: This graph is not intended to be predictive. It is for entertainment purposes only.

Here’s an interactive chart of the raw HPI for all twenty cities through August.

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.

Case-Shiller HPI: Decline From Peak

In the thirty-five months since the price peak in Seattle prices have declined 24.1%, slightly more than last month.

Here’s a complementary chart to that last one. This one shows the total change in the index since March 2009 for the same twelve markets as the peak decline chart.

Case-Shiller HPI: Bounce Since March 2009

Note the distinctive downward turn in every line but Washington DC, New York, and Las Vegas. Even seemingly invincible San Francisco started losing steam last month.

Check back tomorrow for the tiered price breakdown for Seattle.

(Home Price Indices, Standard & Poor’s, 10.26.2010)


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.

79 comments:

  1. 1
    Flotown says:

    Nice analysis, Tim. thanks

  2. 2

    What’s amazing is Las Vegas and the rate that it’s still falling given how far they have fallen. With the exception of Detroit, which wasn’t really a bubble city at all, LV has the lowest CS number at this point, which at about 100 means they are close to 2000 values.

    I have a strong dislike for Donald Trump, and when I heard about the condos he was building there I really didn’t understand where he thought the demand would come from in that city. It does show how even experienced investors can get caught up in hype.

  3. 3
    sp6859ch says:

    Close to 2000 values? We are getting pummelled here.. Again my wife bought her townhome in 1988 for 84k approx, We sold it for 225k at the peak in 2007…Talk about deciding to move her in with me at the right time…. OH and now that same townhome is a foreclosure listed for 75k!!!!!!!!! This is how it is in many many areas of town and this is on the west side not a bad area.. They like to say Vegas is back to late 1999 pricing but the fact is our pricing was basically unchanged from 1991 to 1999. The only reason our pricing went up on the whole wasn’t because of resale move up buyers these were all one time sales new construction to new buyers moving in town.. I have watched the parallels to Vegas and Seattle closely ever since i moved to Vegas in 1991, Thus my bet is to be at the trustee sales this upcoming year in Seattle Tacoma when the news and the cocktail hour conversations that we have hear move up there about bailing on homes that are 100k under water

  4. 4
    deejayoh says:

    By Kary L. Krismer @ 2:

    What’s amazing is Las Vegas and the rate that it’s still falling given how far they have fallen. With the exception of Detroit, which wasn’t really a bubble city at all, LV has the lowest CS number at this point, which at about 100 means they are close to 2000 values.

    I have a strong dislike for Donald Trump, and when I heard about the condos he was building there I really didn’t understand where he thought the demand would come from in that city. It does show how even experienced investors can get caught up in hype.

    That Trump Tower seems like really poor planning. It doesn’t even have a casino in it and it’s a quarter mile off the strip. It just seems like poor planning. And I think, IIRC – that is one that he owns, not one that he just licensed his name to. not 100% on that.

  5. 5

    To Quote Johnny Cash on the Downward Spiral of Real Estate Prices

    “….I Fell Into A Burning Ring Of Fire
    I Went Down, Down, Down
    And The Flames Went Higher

    And It Burns, Burns, Burns
    The Ring Of Fire
    The Ring Of Fire…”

  6. 6
    Cheap South says:

    RE: Kary L. Krismer @ 2

    His project in Tampa was canned in 2007 when the writing was on the wall. Last I heard there was legal action going on.

    Seattle – 17.5% more to go!!

  7. 7

    RE: Cheap South @ 6 – Developers have to work on the edge, so the chance of them failing is pretty great. But LV was going practically straight up for a time, when it had a long history of basically just staying even with inflation. To invest in a project in such circumstances, where that project probably takes a minimum of 3 years to complete, that just seems foolish.

  8. 8
    wreckingbull says:

    RE: deejayoh @ 4 – Remember, you are talking about the guy who picked Kendra Todd to ‘run’ one of his organizations. He should have seen past his own ego and focused on the writing on the wall. Could have saved him and his investors quite a bit of money.

  9. 9
    deejayoh says:

    By wreckingbull @ 8:

    RE: deejayoh @ 4 – Remember, you are talking about the guy who picked Kendra Todd to ‘run’ one of his organizations. He should have seen past his own ego and focused on the writing on the wall. Could have saved him and his investors quite a bit of money.

    Yeah. One of the other winners was a business school classmate of mine. He was never impressive then, but I guess “The Donald” liked him.

  10. 10

    Probably employing just about anyone looks good, when two of your employees are your kids. ;-)

  11. 11
    TheHulk says:

    Back on topic, I wonder what pfft has to say about this latest CS report. Wasn’t he claiming something ridiculous like the recession is over, YOY increases are here, buy now or get be renters forever etc?

    My word. This is the CS index for August. Which means it still includes the govt induced tax credit distortion from June. Next month should start reflecting reality a little better. I guess at least 5% declines thru this winter are inevitable.

  12. 12
    Jillayne says:

    “Lawrence Yun, NAR chief economist, said the housing market is in the early stages of recovery.”

    http://www.realtor.org/press_room/news_releases/2010/10/sept_strong

    How many quotes can we find from this guy where he’s already had to eat his words? Jeez.

  13. 13
    Blake says:

    A woman sitting on the plane next to me was reading one of Trump’s books… it always amazes me that he is widely portrayed as a savvy businessman. How many times has he filed for bankruptcy?

    (snip from wikipedia): Trump has been caught in the 2008 financial crisis as sales for his Trump International Hotel and Tower in Chicago have been lagging and he failed to pay a $40m loan to Deutsche Bank in December. Arguing that the crisis is an Act of God, he evoked a clause in the contract to not pay the loan and initiated a countersuit asserting his image has been damaged. Deutsche Bank has in turn noted in court that ‘Trump is no stranger to overdue debt’ and that he has twice previously filed for bankruptcy with respect to his casino operations.

  14. 14

    By Blake @ 13:

    How many times has he filed for bankruptcy?

    Don’t pull a Rosie. ;-)

    He’s never filed. Entities he’s owned have filed. But again, developers have to operate on the edge.

  15. 15
    Marc says:

    One group who deserves no pity are the institutional schmucks who loaned Trump money. How about those developers who licensed the “Trump” name for their projects? http://www2.tbo.com/content/2009/mar/07/bz-trump-resort-folds-in-mexico/ I wonder if Donald made sure to get a taste up front on those deals.

  16. 16
    S. Marty Pantz says:

    By Jillayne @ 12:

    “Lawrence Yun, NAR chief economist, said the housing market is in the early stages of recovery.”

    http://www.realtor.org/press_room/news_releases/2010/10/sept_strong

    How many quotes can we find from this guy where he’s already had to eat his words? Jeez.

    NBC’s “Today” show’s real estate “guru” Barbara Corcoran said on that show June 28, 2008 (which I wrote down in a notebook): “No one disputes that we are near the bottom.” Ever since then, I take what she has to say with a grain of salt. She does not seem to give objective, honest data, but appears to be another “buy now before it’s too late” shill just as much as Yun is.

  17. 17
    Cheap South says:

    RE: Jillayne @ 12

    At this point, to be the NAR Chief Economist must feel like the Ford Pinto Chief Mechanic felt in the 70s.

  18. 18
    Ben says:

    RE: TheHulk @ 11 – I’m sure he’ll come up with some excuse that he actually said or meant something else other than his frequent claim that we have “bottomed”.

    This I said regarding his bottom call….

    http://affordablehousinginstitute.org/blogs/us/wp-content/uploads/inconceivable_do_not_think.jpg

    Maybe he is now thinking….

    http://onemansblog.com/wp-content/uploads/2009/05/inconceivable.jpg

  19. 19
    ARDELL says:

    We are not below bottom…yet…but we are getting very, very close to bottom with almost all of the recent drop in October alone month to date.

    At the end of September the median home price in King County was 7.8% above the bottom of March 2009. If you include Seattle townhomes as single family homes…we are down almost all that in October alone. If you exclude mobile homes, houseboats and townhomes, we are a very short hair above bottom, with a huge decline in the month of October.

    The last week usually has a lot of sales in each month…so a little early to call. But we could fall below bottom by month end.

    http://www.realtown.com/Ardell/blog/seattle-real-estate/king-county-prices-falling

  20. 20
    hrpuffinstuff says:

    This was the price snapshot in August, based on what I see we’re down from there. I’ve seen Greenspan warn a couple times now about that significant layer of homeowners on the edge and another drop could push them to capitulate

  21. 21
    anonimaniac says:

    RE: ARDELL @ 19

    We are nowhere near bottom. The trend lines are pointing down but not a steep slope, yet. We have only dropped about 24% from peak. There is another 25%, at least, to go in Seattle, even the “special” neighborhoods. Bubbles, especially real estate, overshoot the expected “bottom.” Another 10% down and you will see people walk away in droves (or stay rent-free; another home owner subsidy courtesy of government policy).

  22. 22
    patient says:

    I suspect Ardell incorrectly called the post bubble low mark so far “the bottom”. We are about 1.6% above the low mark with August c/s number. Barring any new craziness from the gov. we’ll most likely slide far below that before year end.

  23. 23
    ARDELL says:

    RE: anonimaniac @ 21

    Looking at the most recent info available…we have gone from 7.8% above the previous “bottom” of March 2009 (we have increased much since then due to the tax credit) back to almost that “bottom” for the first time in the last 19 months…and a significant portion of that drop was in the last 3 weeks.

    Yes…we will see a “new bottom” and possibly many more in your lifetime. But dropping through that point for the first time in almost two years is a significant newsworthy event. Especially given the speed at which the prices are changing. Usually volume drops off a cliff and it takes price a lot longer to follow suit.

    I agree we could see an additional 25% from here…that’s old news from back in June when Goldman Sach’s posted their graph

    http://www.realtown.com/Ardell/blog/tracking-the-market/can-seattle-home-prices-go-down-another-22-cont1

    Still…this is the first solid evidence, and is happening as we speak. Looking at September or prior stats is meaningless now. We were up from “that bottom” by 7.8% in September of 2010. Case Schiller has too much of a lag. By then we could be significantly past the floor from 3/09 and that could quickly push us into 2004 and even 2003 price levels for the first time…well, since 2003.

    We have to stay on top of the present…not look at data from July.

  24. 24
    drshort says:

    We wont really have a good grasp of market health until next spring. The housing credit creating a really long winter like selling season. It’s been pretty dead since June and the inventory is now very stale.

    The people I know who’ve been looking for houses have pretty much taken the rest of the year off and say they’ll get serious again next spring. If that happens with any significant volume, the market should be relatively flat. If not, further down we go.

  25. 25
    ARDELL says:

    RE: drshort @ 24

    Flat’s not gonna happen. We got back to bottom way too fast for that to be a possibility. That’s why we need to pay very close attention to the velocity of this recent movement.

    Rather…Mr. Comment #20 (hrpuffinstuff) is more likely correct, and when the news is out that we are crashing through that old floor pricing…those trying to hang in waiting for the market to improve will be pushed “to capitulate”.

    That’s when all hell is going to break lose.

    As to patient’s comment…that’s like saying there was no “peak” because some day 15 years from now we may pass that point again. Each market cycle has its peaks and bottoms…rinse and repeat. 3/09 was the last historical “botttom” and we will soon be heading toward a new one.

  26. 26
    ARDELL says:

    RE: drshort @ 24

    Seriously…you think Spring 2011 is going to cure that? Maybe a $15,000 tax credit…but simply “spring bump”? Pass me some of whatever you are smoking…

  27. 27
    drshort says:

    RE: ARDELL @ 25

    I think you’re putting too much significance in 3 weeks worth of data. Because of the tax credit, all the year’s action was compressed into 3 – 4 months early in the year. Even in bubble years, losing 5% in the final quarter wasn’t atypical. It wasn’t that the market was declining, it was because the profile of houses that sell in 4th quarter is different than those that sell in spring / early summer.

  28. 28
    ARDELL says:

    RE: drshort @ 27

    I don’t agree. I think “the compression theory” is wishful thinking.

    The tax credit stopped the snowball from rolling down the hill at 3/09. The decline is now resuming from where it left off. I had hoped for a slower rate of decline…more like from 8/07 through 3/09. But this ball is rolling…and quickly.

    Hold on to your hats…

  29. 29
    drshort says:

    RE: ARDELL @ 26

    Fix what? The market was up 7.8% from the “bottom” for only one month after right after the tax credit expired which resulted in a mix shift away from first time buyers. I’m surprised you’re putting any significance in that number. Aside from that one month, we’ve been pretty flat for about a year. My point is simply that the there’s all sorts of mix shifts going on due to the tax credits, seasonality, and distressed sales. Using a month or two of median data (much less 3 weeks) and drawing conclusions from that is poor logic.

    Next spring will give us a much better look at how the natural market is behaving.

  30. 30
    ARDELL says:

    RE: drshort @ 29

    Dr. Short siad: “The market was up 7.8% from the “bottom” for only one month after right after the tax credit expired”

    uh…NO…it’s been up every month since 3/09. This is the FIRST time it will be lower. It has been up and over “bottom” many times, and ALL the time since 3/09…and still is…but by a short hair.

    I’ve been tracking the market using my own stats consistently for years…not one month, and not using numbers handed to me by Case-Shiller or the NWMLS or The NAR. I don’t trust anyone to run the numbers for me… not even an assistant.

    Trust me…this is a significant movement and is not something spring bump 2011 is going to cure. The best of homes are not for sale and not likely to be for sale, unless they are foreclosures or short sales. Any way you slice it…we are in for a wild ride.

    Maybe…and that’s a big maybe…if the election swings Democrat we’ll see some more stop gap measures that will create a shift in the tide. But I don’t think that’s going to happen. Do you?

  31. 31
    ARDELL says:

    I was talking to The Tim on twitter…and the only possible “cure” I see is something I mentioned about a year ago.

    http://raincityguide.com/2009/12/16/8150/

    I think people would trade the mortgage interest deduction for an up front tax credit. If we swing Republican in this election, which we likely will, there is no possible way this remedy will be seriously considered.

    People respond well to getting cash up front to buy a house…and pretty much dismiss the interest deduction as an incentive to purchase. But I don’t think the government would get away with it for people who already own homes. It would have to be a one time election at time of purchase, and not retroactive for those who already own homes.

    Obama could have gotten away with it a year ago…but I think that ship has sailed.

  32. 32
    Lurker says:

    RE: ARDELL @ 30

    I don’t know what your numbers have been showing exactly but it does seem that Seattle is rolling back down that hill. Redfin’s update today mentioned how sales volume tanked after the tax credit expired but volume ticked back up a little for many markets in September.. Except for Seattle which declined even more in September.

    The good news is that we’re not alone. We’ll at least have our sister city of Portland to hold our hand as we drive off that cliff together. (pardon my drama, couldn’t help it)

  33. 33
    drshort says:

    RE: ARDELL @ 30

    The monthly King County SFH median has been in a tight range with no significant trend up / down for the past 18 months. Your assertions that we were up 8% off the bottom and now back down might be factually correct, but misses the overall picture of what’s been happening. Those data points were noise, mix shifts, and/or explainable by outside factors.

    Month / Median
    January 2009 $382,500
    February 2009 $375,000
    March 2009 $363,850
    April 2009 $380,000
    May 2009 $375,000
    June 2009 $395,000
    July 2009 $384,000
    August 2009 $375,000
    September 2009 $382,160
    October 2009 $377,500
    November 2009 $370,000
    December 2009 $380,000
    January 2010 $375,000
    February 2010 $373,010
    March 2010 $367,250
    April 2010 $375,000
    May 2010 $379,000
    June 2010 $383,000
    July 2010 $399,950
    August 2010 $380,000
    September 2010 $379,950

  34. 34
    ARDELL says:

    RE: drshort @ 33

    Everything is “explainable by outside factors” . I’m quite comfortable with being “factually correct”.

    You know Dr. Short…I watch this game day in and day out for almost 40 years, and I don’t blow a horn for nothing. I waved frantically in February of 2009 saying the March closings would be the bottom…for the foreseeable future.

    http://www.seattlepi.com/local/399422_housesales10.html

    Now I’m saying “look out below”. I was right before…and I’m pretty sure I’m right again. The last time I made dramatic movements predicting impending doom was the week before Black Friday and Black Monday in 1987 :)

    If every single seller made sure their photos were rock solid, showing condition was the best it could be and their price was dead on current value…there would be hope. But I’m not holding my breath that is going to happen. Not now…and not in Spring of 2011 either.

  35. 35
    ARDELL says:

    RE: Lurker @ 32

    Your drama is just fine. Less dramatic than mine. My analogy is I’m Auntie Em telling Dorothy to get into the cellar before the twister hits.

  36. 36
    Jonness says:

    By softwarengineer @ 5:

    To Quote Johnny Cash on the Downward Spiral of Real Estate Prices

    “….I Fell Into A Burning Ring Of Fire
    I Went Down, Down, Down
    And The Flames Went Higher

    And It Burns, Burns, Burns
    The Ring Of Fire
    The Ring Of Fire…”

    So you are saying Johnny was referring to a bubble buyer’s sphincter muscle when he wrote that song? :)

  37. 37
    David Losh says:

    The statistics must be sales data.

    You can also talk the bottom of the Real Estate market place which is just as pointless.

    You have to find a mean, a point of reference, which I still contend was the banking law changes of 1998 which brought us a false sense of hyper inflation. We have the same thing going on today with cheap interest rates. Those rates are what’s propping up the market place today.

    Probably there is an expectation of more inventory, prices will drop, and it will again be a great time to buy, and sell.

    I’ll agree with that for a whole bunch of reasons that don’t have to do with statistics. I’ll trust the herd mentality instead.

    The only thing the Real Estate market place has needed was some reality. The foreclosure fraud is shedding new light on how banks operated, how we got to this point, and now exposed, the money, big money, is going elsewhere.

    Control of the Real Estate market may now return to the control of the small investors, and even mom, dad, and the kids.

    This is a devastate landscape that people should be extremely careful in. You should know your product inside, and out. You need expert advice.

  38. 38
    Jonness says:

    By TheHulk @ 11:

    My word. This is the CS index for August. Which means it still includes the govt induced tax credit distortion from June. Next month should start reflecting reality a little better. I guess at least 5% declines thru this winter are inevitable.

    In addition, I’ve noticed prices started falling faster in September and into October as reality really began to set into the marketplace. I expect this to translate as continued downward momentum as we move forward.

    Prices appear to me to be dropping extremely fast. I’m seeing more and more foreclosures listed at around 2003 prices. As one poster put it recently, “today’s good deal is tomorrow’s comp.” Once we hit solid 2003 prices for non-foreclosure sales, the cyclical feeding frenzy will be in full swing.

    Somewhere in the midst of this fear-based frenzied ordeal, good deals on cash-flow positive rentals will become the norm. However, I don’t expect Seattle to get as bad as Vegas. There are too many stark contrasts between cities (for example, the unemployment rate and jobs base).

    The Fed will soon step in and lower mortgage rates. But rates are so low now, one as to wonder whether it will do much good. Given we are at the front-edge of another downward spiral, betting on the Fed appears to be the same sucker bet as last year. IOW, today’s buyer will most likely become tomorrow’s underwater homeowner.

  39. 39
    Jonness says:

    By ARDELL @ 28:

    RE: drshort @ 27

    I don’t agree. I think “the compression theory” is wishful thinking.

    The tax credit stopped the snowball from rolling down the hill at 3/09. The decline is now resuming from where it left off. I had hoped for a slower rate of decline…more like from 8/07 through 3/09. But this ball is rolling…and quickly.

    Hold on to your hats…

    I was in strong disagreement with Ardell back when she called a bottom. What looked like a potential bottom turned out to be a false bottom. You can clearly see the nationwide support of house prices in the charts above. Seattle began correcting late, but support for all cities was across the board. That to me was a useful indicator which foretold more downward pressure once the support ended; hence, a temporary false bottom and more price declines in the future.

    However, I think Ardell is making a lot of sense right now. It’s not just crappy stale listings that are being discounted heavily. We appear to be crossing a very dangerous transition line. In fact, according to Clear Capital’s data, we appear to have stepped off the edge of a cliff.

    “Special Release: Clear Capital™ Reports Sudden and Dramatic Drop in U.S. Home Prices

    Most recent data shows a two-month 5.9% price decline representing a magnitude and speed of decline not seen since March 2009; similar declines for September and October expected to appear in other industry indices in coming months.”

    http://www.clearcapital.com/company/pr_details.cfm?source=patrick.net&position=30686#header

  40. 40
    sp6859ch says:

    YOU will be amazed at the steep rate of decent that happens in a 3 month period it leaves one breathless and equityless…Ardell you seem to have the best grasp on what i am thinking will happen. I travel from state to state and there has been one common thread.. The spiggot was just turned off!! It happenned in Vegas in a snap.. And its my opinion it will happen there. This last year was the perferct perfect get out of jail free card for homeowners in the Seattle-Tacoma area to sell.. But like most sheep they stay put thinking they are immune. Then in a blink of an eye an REO bank owned is listed just down the street for 60k less than the last sale.. OH and it doesn’t sell. Then guess what citi-bofa-fannie-freddie. They ask for bpo’s to be done and they want a 30 day sale liquidation price on that bpo so they list the next home below the one that was listed for 60k less. Oh then those appraise and bammmola, your whole neighborhood has a new value it happens THAT FAST. It doesn’t matter if those homes were totally gutted they won’t care if your home has heated floors, gaggenau appliances, your home will be valued with the rest of them.. When i saw the Goldman Sachs report a few months ago about the declines Seattle will see, i knew everybody would just say no way never.. Well get ready to start having the conversations at cocktail hour that are happening elsewhere about strategically defaulting.. The fact that you are still way above 2000 values would scare the crap out of me if i was a homeowner up there… Get a comfy chair and i will see ya at the steps.

  41. 41
    transplantD says:

    It does look like the next leg down is starting. And I have to admit Ardell’s call at the time doesn’t look as crazy as I thought when first posted :)

    I just read an article on marketwatch about how in the very near future interest rates are, in all likelihood, headed back up. I know there have been a few discussions here about correlation/causation between rates and prices, but I think the sensitivity to this is heightened right now and if it does start getting back up to mid 5s. It could exacerbate and speed up our decline in 2011.

  42. 42

    By Jonness @ 39:

    I was in strong disagreement with Ardell back when she called a bottom. . . .

    However, I think Ardell is making a lot of sense right now. I

    So in another words, you disagree with optimistic projections and agree with pessimistic projections. ;-)

    Ardell’s predictions are very useful for those who buy and sell on a 6 month schedule, and are willing to ignore history. Other than that, they’re completely worthless.

  43. 43
    Ben says:

    RE: Kary L. Krismer @ 41 – I’m not sure what you mean by “ignoring history” and “buy and sell on a six month schedule”. Please explain.

    I think sp6859ch lays out a very probable future that is based on history.

  44. 44

    What I mean by a six month schedule is most people buy planning on selling years down the road, not months. Ardell seems to change her take every six months. Not too useful for buyers. If the opinion had any value at all (questionable), it could be useful for sellers who might be thinking they want to wait it out until Spring. But it’s also a sales tool for an agent wanting a listing where the seller has such thoughts.

    Ignoring history is complex, so I’ll just say that listening to Ardell on this topic would be like listening to Jim Cramer on future stock prices. ;-) And that’s actually a good comparison in that a lot of the times I feel Ardell is trying to apply some sort of resistance/trend analysis that she probably learned in her days as a stock broker (or whatever she was), that has little or no application to real estate.

  45. 45
    Ben says:

    RE: Ben @ 43

    Higher frequency data such as housing tracker are still firmly in a downtrend. That is how I knew pfft and others who rely on low frequency lagging data such as CS were dead wrong.

    http://www.housingtracker.net/asking-prices/seattle-washington/

  46. 46

    RE: David Losh @ 37

    So True David

    Past assumptions on real estate are inadequate to make investment decisions, the world is changing faster too, like a spinning top picking up speed.

    Another example is automobiles. Car and Driver just put out the 2011 company ratings and guess who got the top design innovation grades?

    GM and KIA (A-): I can see GM getting this honor with all it’s new fuel miser choices, but KIA was picked for similar reasons, it’s cars look nicer than it’s competitors.

    Toyota (D+): They make the same old styles and they’re boring.

    Ford, Mercedes and Chrysler all got B’s…..Honda/Acura (C-)

    Yesterday’s assumptions are tomorrow’s exceptions.

  47. 47
    Ben says:

    RE: Kary L. Krismer @ 44 – I view ignoring history as dismissing the long term relationship of housing prices relative to income, rents, interest rates, and the health of the general economy. Ignoring mean reversion is ignoring history to me. Ignoring the distortions of government policy and lending practices on these relationships is ignoring history to me.

    In order to avoid becoming a strategic defaulter or worse in a new long term home purchase, one needs to know where a “true” bottom can be spotted.

  48. 48

    RE: Ben @ 47 – That’s not the context I meant it in at all. I would say though that looking at too short of a time frame, and trying to extrapolate from that, can be just as bad as completely ignoring history in the context you are using.

    In any case, past price history is of limited usefulness. Did the 20 years of Seattle having steadily rising prices tell you that it would peak in 2007? If anything it lead some to conclude that the prices would keep going up forever. In contrast, Las Vegas had a history of very flat prices, and then suddenly shot up. I would say that is the type of history that could have told you something, and that something was not that the prices would keep rising! So it’s not something you should ignore by any means, but it’s not going to give you all the answers.

  49. 49
    Ben says:

    RE: Kary L. Krismer @ 48 – Agreed. Government policy distortions make it hard to predict the future. For all I know, we’ll get a $25k homebuyer credit from the lame duck congress (dear God no!) which would goose prices in the short term. I am renting and waiting for a “safe” zone to buy for the long term.

    I will admit that at times I just want to take the plunge and look at strategic default as a business decision like everyone else is doing should present trends continue. Consider me a prudent saver, who is trying to do the right things.

  50. 50
    patient says:

    If the government gives the banks another couple of billions free tax payer money with another home buyer tax credit we will probably see people with pitch forks in the street. I can’t see this happening. There is now an awareness of some of these poorly disguised handouts to the banks that just wasn’t there before. I think it would be political suicide to even bring up the idea.

  51. 51
    ARDELL says:

    RE: Kary L. Krismer @ 44

    Kary,

    3/09 to present is not 6 months. Generally my time frame is 12 to 18 months, not 6. As example a client came to me in early 2008 and I told them to rent for a year. A year later they called me and we found a home for 60% of what the owner paid for it in 2006. The market was down 22% at the time, so that gave them an 18% advantage on future declines…so they are still well in the black. Plus it was a good house for them and one they could stay in until that baby was out of high school. It’s a combination of factors, not just the data. But NO agent can advise clients with NO grasp of what may happen within a 12 month period.

    In the previous 12 month period I expect substantial declines, so I told them to rent for 12 months. In the next 12 month period (per my “bottom” call, I expected a flat to up market, so we found a deeply discounted good property. I was right on all counts. That’s good enough for me.

    For my clients the question is buy now or rent for a year. At the end of that year we look at the facts of the time again. Couple that with the likelihood of staying in the house for at least 10 years. If that same client expected to move within 3 years, that 40% discount from 2006 value would not have been good enough. I walk away from clients every day. Sellers who want too much or buyers who want to buy for 2 to 3 years. That answer is clear…get another agent to help you do that. That was not the case in 2005 BTW, so it is not a standard pre-set timeframe. It is based on market expectations.

    I was out in Renton last weekend with clients, a place I don’t normally go. The client “liked” a certain house and I said if you like this then go home, because the cost of in and out isn’t worth the difference between this house and the one you already have. Not a good trade up. Not enough better than the one you already have.

    To agents who simply open doors and say if you like it I will write it…as long as comps (by definition stale info) support that value, I say, that is NOT why we make the big bucks. I will let a buyer represent themselves on one of my listings and keep the buyer agent fee and do that…but I won’t help a “buyer client” do that. There’s a difference.

    I’m more than willing to be right for almost two years…it’s better than having no opinion at all…and as a hedge against future decline we:

    1) Buy a house they can stay in for 10 years or more

    and

    2) Get a significant discount over today’s supportable value

    That may not be good enough in your eyes, but it is clearly a rational train of thought and more than most buyer clients get from their agents.

    You just want no one to do more than you are able to do…not a realistic position to take.

  52. 52

    RE: ARDELL @ 51 – I don’t really have the time to verify your statements as to when you took what position. When you turned negative the first time you completely denied having been positive just prior to that. It was like a light switch, not a slow changing of position as you claimed at the time. But so it may be 12 months, not six, That really doesn’t matter. Same result.

  53. 53
    ARDELL says:

    RE: Ben @ 47

    Ben, here’s where I get lost. Maybe you can help me with this. If the health of the economy is dependent on housing “starts”, there is no place to go but down. The economy cannot be that dependent on new homes being built. It should be based on resale of those already built.

    There is no sustainable financial future in always needing the construction industry to be healthy. At some point an area is built out ,and no new starts should not equal the stock market tumbling into a depression…and yet it does.

    I don’t know what to do with that info except to stuff a mattress with cash. Can you help me with that?

  54. 54
    ARDELL says:

    RE: Ben @ 49

    That’s why leverage is important…minimizing the downpayment. You can always refinance into a smaller loan when the dust settles…

    If you have to lose money…better to lose someone else’s money and take the credit score ding down the road, if needed. I think that’s called “hedging your bets”.

  55. 55
    ARDELL says:

    RE: Kary L. Krismer @ 52

    “new” information does that, Kary. Anyone who is not willing to flip on a dime when new information enters the room is too attached to ego. That’s like saying a driver was fine moving along when the light was green, but made a complete stop when it turned red. Duh! At least I don’t look behind me to see that red light, as most agents do.

    Look at it this way, Kary. You don’t have the time to check on my advice to know if I was reasonably accurate. But you do seem to have plenty of time to simply conclude they have been erroneous. BUT I am and have been visible enough that if I had clients who suffered as a result of my advice…you would know it. Right? In the last almost 5 years, most of my clients have come from blogging…so they are no stranger to knowing where to go to complain.

    My advice made front page news in early 2009….and that news is still accurate today. I’d say that’s a golly good track record. Better than NAR’s Yun and likely better than Bernanke as well. That’s good enough for me.

  56. 56
    Lurker says:

    Yes, “bailout” seems to have become a very un-vote worthy word but isn’t that what QE2 is going to do?

    Please correct me if I am wrong on any of this but banks have been essentially borrowing free money from the Fed and in return buying treasuries bonds with the money. When QE2 comes into play the Fed is going to buy back these bonds from the banks and the banks will make some money from it. (what I don’t understand is how) and they badly need to replenish their capital reserves because distressed commercial and residential mortgages are eating away at it. MERs is going to eat some of that too.

    The Fed likes QE2 because it will keep interest rates low and the Treasury likes it because it makes the dollar more competitive in the currency battle.

  57. 57
    ARDELL says:

    RE: Lurker @ 56

    The bailout would not have been necessary if PMI (private mortgage insurance) on LTVs over 80%, was not replaced with high interest rate second mortgages. The banks took a business risk to be self insured, in exchange for higher interest rates on the top 20% of value. They gambled. They lost. Now they use PMI or MIP again.

    The top 20% of value was backed by insurance, except from very late 2003 (around here) through late 2007. If the same thing happened again, the banks would be paid by the PMI company, as I understand it. The failure of “the system” was the decision to be self-insured against declining home prices.

  58. 58

    By ARDELL @ 55:

    My advice made front page news in early 2009….and that news is still accurate today. I’d say that’s a “golly” good track record..

    I would agree it’s good to change based on new information, but what isn’t good is to change and then deny your prior position.

    Your year 2007 prediction: http://raincityguide.com/2007/02/06/ardell-on-where-is-the-2007-market-heading/ (February 2007, things will remain rosy like the past, but not quite as strong. 5 months before the peak.)

    Here’s where you suddenly turn bearish: http://raincityguide.com/2008/04/17/seattle-real-estate-2008/ (April 2008, 9 months after the peak. Not bad on the $400,000 guess, but it took a near complete collapse of the economy to get there! I wish you would have warned us about the near complete collapse of the economy!).

    Here’s where you called the bottom: http://raincityguide.com/2009/02/07/were-at-bottom/ (February 2009).

    I suppose that was good advice for buyers since Case Shiller was at 152 then and 146 now. Median 375k then, 379k now. The rate of decrease did flatten out, but now you’re outlook is negative again!

    So how many of your buyers bought based on your February 2009 advice that we were at the bottom, but have sold since then so that your prediction is now irrelevant to them? Or let’s go back further. How many of your clients bought based on your February 2007 advice, that everything was still rosy, but have sold so that now your current projection is irrelevant to them?

    I just don’t see that you’re doing anyone any favors by making these predictions. Home ownership is typically of too long of a time frame, where too many things can intervene (e.g. the financial crisis in late 2008), and there are too high of transaction costs. It’s not something you can just jump in and out of. I continue to believe people should buy primarily based on their abilities, needs and desires, and if they are concerned about future values they would make their own determination and not rely on that of a real estate agent.

  59. 59
    Ben says:

    RE: ARDELL @ 53 – That’s a very interesting topic. I think I have seen somewhere on Calculated RIsk an analysis of population growth, household formation and replacement housing stock. Since the early 2000’s, there has been a ton of demand pulled forward due to bubblicious credit policy and foreclosuregate fraud perhaps as well. New construction won’t return to health until supply/demand falls back into balance. Complicating the picture is the poor overall economy and unfavorable household formation of late.

    It’s a big mess, without a doubt.

  60. 60
    ARDELL says:

    RE: Kary L. Krismer @ 58

    Running out to a listing appointment…quick response…I don’t thing I said “golly good”. I’ll have to check…but did I really say “golly”? Seems out of character. :)

  61. 61
    ARDELL says:

    RE: Ben @ 59

    If you run into anything on that topic, I’d appreciate a heads up. I just don’t “get” an economy that needs new houses being built to be “healthy”.

  62. 62
    Scotsman says:

    RE: ARDELL @ 61

    “I just don’t “get” an economy that needs new houses being built to be “healthy”

    Hmmm, I guess they didn’t cover that in the Wharton summer program? New construction and its spin-offs have traditionally represented about 6% of GDP for the last several decades. That would be about twice the average rate of GDP growth. Another way to look at it would be that without a healthy market for new construction, all else being equal, we would have been in a constant recession/depression. So yes, given the historical model of our FIRE (Finance, Insurance, Real Estate) economy for the last 20-25 years new construction has been a foundational element.

    Going forward, do we need new construction to be healthy? No, but we do need to replace that 6% of GDP with something, preferably something (like manufacturing) that creates a capital asset. Why? Because capital assets are the base of our credit based monetary system, and without them it becomes increasingly hard to promote new growth through an ever expanding money supply. But I’m sure you knew that- Wharton promotes such thinking.

  63. 63

    Ardell, SB limits words you can say and converts them to “golly.” Interesting though that OEM was able to get crap through yesterday. A lot of the words converted are very tame.

  64. 64
    Michael says:

    Maan….I have to laugh at your comparison of. Las Vegas and Seattle …. Vegas….a city that lives and dies on discretionary income….vs Seattle ….what a joke
    oRE: sp6859ch @ 3

  65. 65

    By Michael @ 64:

    Maan….I have to laugh at your comparison of. Las Vegas and Seattle …. Vegas….a city that lives and dies on discretionary income….vs Seattle ….what a joke
    oRE: sp6859ch @ 3

    Beyond that, when their economy grows, how many of the additional people employed are in high income positions? That was my concern about what Trump was doing. I just couldn’t see how the local economy would support it, or why someone from out of town would be interested when there are hotel options.

  66. 66
    One Eyed Man says:

    RE: Scotsman @ 62 – And Re: Ardell @ 61

    Notwithstanding his comments about Wharton, I believe Scotsman and Herman have a point regarding the contribution of residential construction and related economic activity to GDP, although I haven’t verified the specific stats quoted.

    But just as a point of order, there’s no need to be overly polite to Scotsman. He’s not likely to be considering employing your services and I’m pretty sure he lacks the sensitivity for you to hurt his feelings. Just try to make it funny cause there’s not much I enjoy more than humor at someone else’s expense.:-)

  67. 67
    Lurker says:

    Think about all of the work and money that goes into new construction. Planning, designing, permitting, materials, labor and all of the new loans involved to do these things.

    Existing home sales generate very little in comparison.

  68. 68

    RE: Lurker @ 67 – Less in comparison, but not very little. Moving tends to require a lot of new stuff at Home Depot, furniture stores, etc.

  69. 69
    Dave D says:

    I don’t think we’ll see a ‘bottom’ in home sales prices until a few quarters into rising interest rates that are coming sure as hell. I am planning to buy my next house in late 2012 for cash. Waterfront. For now, I’m a happy renter. On waterfront. LOL

  70. 70
    Ben says:

    RE: Dave D @ 69 – I’m with you, Dave. I’m still working on my patience, but keeping one’s powder dry appears to be the wisest course for the forseeable future.

  71. 71
    Lurker says:

    RE: Kary L. Krismer @ 68

    People that buy new homes have to buy furniture too! It’s going to take a lot of trips to Home Depot for paint to bump that GDP up a point.

  72. 72

    RE: Lurker @ 71 – I agree, and agreed resale is less overall. I’m just pointing out that resales do more than what you would think at first glance. It’s not just real estate agents, inspectors, small time contractors, appraisers and loan originators making money.

  73. 73
    David Losh says:

    RE: Scotsman @ 62

    Thank you, better you than me to point out the obvious. I also don’t get a Wharton Business School attendee, who is in the Real Estate industry, that doesn’t get the Housing Starts portion of the economy. It has been very big news for over twenty years.

  74. 74
    David Losh says:

    RE: Lurker @ 67

    The new construction goes directly to durable goods orders. The houses need furnaces, refrigerators, stoves, washer, drier, along with all the pipe, lumber, and wiring.

  75. 75
    ARDELL says:

    RE: David Losh @ 73

    LOL…David…I understand that our economy is dependent on there always being more new houses being built. I don’t think it is practical for our Country to be dependent on that happening year after year after year. We can’t always have more new houses, unless we make them disposable like cars.

  76. 76
    sp6859ch says:

    Homes are like cars at the moment as far as an investment You leave the closing table and you are already down your 3% in non-recurring closing costs, THen factor in the eventual sales costs, if an agent charges you 6% to sell and you have another 3% in closing costs when you sell you are 12% under water when you get the keys!!! So at a nice little Seattle Sales price of 250k you are already behind 27k!! People are getting wise to that fact. Also with the lack of buyers chances are the home you bought nobody else really wanted or they would of bought it by now. So basically it is worth less to someone else. Add in possible (probable price declines). The wheel, or should i say spiral takes hold and it ain’t good….Oh Oh that is unless you are buying your car or house at the auction as a wholesaler…The game is changing as we have known it. Remember whey you could tell a buyer that it will take 3-5 years to recoup your buying and selling costs? That was in the OLD days of 3-4% appreciation.

  77. 77

    […] the Graph to use an easy to follow Article and Graphs found for you on the blog Seattle Bubble by Tim Ellis Filed Under: Great Northwest About Guest […]

  78. 78
  79. 79

    […] all influence his perspective on the Seattle-area real estate market. Possibly Related Posts:Case-Shiller: Seattle’s Home Price Double-Dip BeginsCase-Shiller: Flat is the New UpCase-Shiller: Seattle Prices Headed South for WinterCase-Shiller: […]

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