Case-Shiller Tiers: Bottom Still Falling Out of Low Tier

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: < $247,918 (down 0.3%)
  • Mid Tier: $247,918 – $395,019
  • Hi Tier: > $395,019 (up 0.2%)

First up is the straight graph of the index from January 2000 through July 2011.

Case-Shiller Tiered Index - Seattle

Here’s a zoom-in, showing just the last year:

Case-Shiller Tiered Index - Seattle

Despite the fact that the low and middle tiers both fell, the tiny gain in the high tier was somehow enough to lift the overall index into the black for the month. Apparently the Index works in mysterious ways. The low tier fell 0.7% MOM, the middle tier dropped 0.1%, and the high tier gained 0.1%.

Here’s a chart of the year-over-year change in the index from January 2003 through July 2011.

Case-Shiller HPI - YOY Change in Seattle Tiers

More ground lost for the low tier as well as the high tier, despite its month-to-month bump. Here’s where the tiers sit YOY as of July – Low: -16.0%, Med: -9.1%, Hi: -4.0%.

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

Current standing is 39.0% off peak for the low tier, 30.8% off peak for the middle tier, and 25.5% off peak for the high tier.

(Home Price Indices, Standard & Poor’s, 09.27.2011)


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.

15 comments:

  1. 1
    David Losh says:

    This must be the spot lot builder buyers who are offering cash directly to the bank with the promise of improving the neighborhood, and a new loan package.

    This would probably tie into your flipper crowd as well.

    Oh, alright, I’m really not getting any of the Real Estate market place or what buyers are thinking. You have a lot of people here who say they bought, you bought, or they are looking. I can not imagine what any one is looking at.

    I was in Everett yesterday. I’m sure all of that train station, new transit carp looked great in the buying process, but where is the money going to come from to maintain it? It’s a very nice facility, they are all really nice facilities, set in the middle of a ghost town. For that matter I have yet to figure out the next push in Seattle Transit. Come to think of it where will any of the money come from to maintain any of the government provided amenities?

    The low tier is the closest to cash purchases. Investor dollars will chase after these until the well on that runs dry. For the time being the middle tier will be in better shape with fewer buyers until those go back to the bank.

    The upper tier is another set of cash buyers thinking they are getting a safe haven for cash in today’s uncertain financial land scape. Those people should get better financial planners.

    With low inflation, loan defaults, banking on the ropes from global investment, and the shrinking consumer base I just don’t see any future appreciation in prices. This is a stall at best.

  2. 2

    As I said last month, I think it’s the REOs driving down the lower tier. The median list price of REOs SFR in King County is under $215,000! Lot’s of really bad properties (bad roof, defective siding, etc.) in really bad locations (near freeways, etc.)

    Number from NWMLS sources but not compiled or guaranteed by the NWMLS.

  3. 3

    The Stock Market is Soaring, We’ve Fixed the Banking Mess

    Expect YOY price increases in Seattle homes now. Go spend all your money in the stock market now, its bullish too.

    What get’s me about the MSM hype, and it doesn’t matter if its homes, jobs, banks, etc….we’re always “re-fixing”, etc, etc what we supposedly “fixed” months ago…isn’t it like the little boy that kept cring “wolf” and there was never any wolf? After another repeat error prone allegation “mission complete”, we don’t buy the weapons of mass destruction allegations anymore. Maybe the real WMDs are the ants in the bathroom foundation coverred up by the cookie cutter remodeling job on that $500K immaculant looking Seattle museum piece we see listed.

  4. 4

    RE: David Losh @ 1

    Add In New Hospital Construction Too Dave

    The President of the contract nursing company I volunteer for on a board position told me he does business with these “empty new construction shells” laying off direct hire nurses….there’s a big drop in hospital customers, we can’t afford to pay medical/insurance costs anymore.

    Which brings up another point, our local governments insanely raising taxes on property, etc to the tune of “if we build it, they will come” for hospital levies, either lack a brain or are too naive to deserve our votes.

  5. 5

    RE: Kary L. Krismer @ 2

    That’s True Kary

    But what’s even worse, is paying full listed price and getting the same hidden WMD covered up by cookie cutter subpar cheap remodeling….a lion’s share of it done I’d add, by low paid transient workers, working under greedy contractors.

    We need a Betty Crocker seal of approval on our building contractors we trust and regret later [ask my brother-in-law who bought a new home with plastic joints on copper pipes, apparently approved by the building inspector too].

  6. 6
    JG Bell says:

    Kary, the low tier phenomena is not exclusively Seattle’s.

    There is a similar very odd pattern in Phoenix, where the number of sales of basement prices REO homes has risen, driven by all cash investment buyers. And, the supply of ALL homes is down, a lot. But, the prices for foreclosures still keeps falling. Why?

    IF the banksters are “feeding” the foreclosures into MLS as they sell out, and they are; and if the listing prices are, now, almost always the final selling price, why are the banksters lowering their prices? Does someone (BoA?) need a lota “cash”, for their bottom line?

    Any decent – well, there must be at least one, somewhere – economist will tell you and U.S. that its all about “supply and demand”. So, demand is soaring, supply is severely constricted, and prices are falling. Go figure!

    What is also interesting is that BoA has increased their NOTs by 116% on the West Coast = Cal, Nev and AZ + also Wa & OR. Where they found “double” the number of homes that needed to be foreclosed after 3 + years of massive numbers, we do NOT know. But, that means there will be even more downward pressure on the bottom tier.

  7. 7
    robotslave says:

    It might be interesting to also chart tier boundaries and total sales volume over time (dunno what the best source would be for the latter).

    If sales volume is still declining YoY, then what’s going on in the low tier isn’t a lot of fat-cat action moving downmarket, but rather the same action as before (or less), but with fewer buyers closer to the tier boundary.

    The divergent low tier could be explained by having some normal retail buyers chased out, in addition to reduced activity from investors/REOs/bankers/hobgoblins.

  8. 8
  9. 9
    pfft says:

    why the bias towards the lower tier? is it because it’s falling and not rising like the other two tiers and the aggregate?

    bias much?

  10. 10
    Macro Investor says:

    RE: JG Bell @ 6

    “… economist will tell you and U.S. that its all about “supply and demand”. So, demand is soaring, supply is severely constricted, and prices are falling. Go figure!”

    One of 3 things — Quality/condition is going down; buyers are large investors and have some negotiating power; sweet heart deals i.e. something crooked is going on. Probably all three are happening at once.

  11. 11
    Pegasus says:

    Don’t forget that the tiers of incomes are the most affected by the recession, depression, green shoots, whatchamacallit are the lower tiers. Makes sense to have those in the lower tiers of home ownership in more financial jeopardy and thus the deviation.

  12. 12

    RE: Pegasus @ 11 – And when it comes to owner-occupant buyers, I wouldn’t be surprised that the lower end buyers are more negative when it comes to consumer sentiment. Has anyone ever seen a breakdown on that by income level? I remember during what now seems like the mini-mortgage crisis in 2007 that the low end buyers seemed to be more negatively affected by the news reports than the mid-level or high end buyers.

    Also, remember the prior government goal was to increase the percentage of home ownership, and most those additional buyers were in the low end. The way that would tend to reverse would be through foreclosures.

  13. 13

    […] reading the questions in the comments over on The_Tim’s post about “The Bottom Falling Out on the Low Tier”. That prompted me to run some numbers on two cities in King County. One of which is moving more […]

  14. 14
    Nathan says:

    I really wish those y axis’s were labeled. Some of them seem to start a zero, presumably everything to the right is a % difference from 0. But then some of them don’t start at zero. Why not just put a value on y axis, like start it at $150,000?

    Anyway, love this blog and try to check in whenever I’m curious about our Seattle Real Estate Market.

  15. 15

    I was just looking at the lower end houses in our old Skyway neighborhood. There the decline from peak is 45% or more, which is worse than the C-S low end data.

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