Case-Shiller: Another New Low as Price Drops Slow

Let’s have a look at the latest data from the Case-Shiller Home Price Index. According to January data, Seattle-area home prices were:

Down 0.7% December to January.
Down 4.0% YOY.
Down 32.4% from the July 2007 peak

Last year prices fell 2.4% from December to January and year-over-year prices were down 6.7%.

Continuing toward zero change in both year-over-year and month over month. At this rate I would not be surprised to see us hit zero year-over-year by April, a level we didn’t even acheive when the tax credit was in full force.

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

Joining Detroit in the year-over-year increase camp: Phoenix and Denver. In January, Phoenix, Miami, and Washington DC all saw month-to-month increases, while everyone else fell.

Case-Shiller HPI: Month-to-Month

Seattle moved up to near the top of the pile in month-over-month losses, while San Francisco shot to the bottom. Case-Shiller did not release data this month for Charlotte.

Hit the jump for the rest of our monthly Case-Shiller charts, including the interactive chart of raw index data for all 20 cities.

In January, eleven of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops (or saw increases) than Seattle (versus sixteen in December):

  • Detroit at +1.7%
  • Phoenix at +1.3%
  • Denver at +0.2%
  • Washington, DC at -0.6%
  • Dallas at -1.2%
  • Minneapolis at -1.8%
  • Miami at -1.8%
  • Boston at -2.8%
  • New York at -2.9%
  • Cleveland at -3.3%
  • Tampa at -3.8%

Seven cities were falling faster than Seattle as of January: Portland, San Diego, Los Angeles, San Francisco, Chicago, Las Vegas, and Atlanta (where prices continue to get absolutely hammered—down 14.8%!).

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

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 fifty-four months since the price peak in Seattle prices have declined 32.4%, another new post-peak low.

Lastly, let’s see just how far back Seattle’s home prices have “rewound.” So far: May 2004.

Case-Shiller: Seattle Home Price Index

Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 03.27.2012)

  

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.

61 comments:

  1. 1
    patient says:

    “At this rate I would not be surprised to see us hit zero year-over-year by April,”

    I would. It’s not impossible but it requires an average MoM increase of 1.3% Feb – Apr. Pretty bold prediction since Feb is usually not that strong. Not impossible for sure when the spring juices starts flowing in impatient home buyers but I would still be surprised.

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  2. 2

    RE: patient @ 1 – Between fewer REOs on the market, which seemingly affects C-S’s mix, and the buyer frenzy currently going on, it’s not that unlikely.

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  3. 3
    ray pepper says:

    http://www.youtube.com/watch?v=yqyixwqiCag

    But, I thought there where whispers here on the Bubble of a “bottom”??? Wait till 2013-forward when the Banks start ramping up the trustee sales and more and more sellers get the “incentive of a lifetime” to short sale their home…..Soon homeowners will say………”3,000 to short sale my home, Susie got 15k, and Stanley got 25k….and Humphrey got a principle write down of over 50%………………….”

    The party is just getting started and the guests are just about to arrive!

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  4. 4
    patient says:

    RE: Kary L. Krismer @ 2
    Maybe, but the fact that 1/3 of homes sold YTD were bought cash might be an indicator that bargain hunting is still a big chunk of the market even if the more conventional market is in a frenzy due to restricted inventory. I agree that it might not be “that unlikely” but I would still be surprised if we hit 0% YoY in April CS. Not shocked by any means but surprised.

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  5. 5
    patient says:

    RE: ray pepper @ 3
    Right on Ray. It’s already happening, at a dinner party last weekend we had a couple complaining about how their neighbour stopped paying a mortgage of about $800k that he can easily afford. He took a risk and won. He got a write down of $200k and a change of interest rate from 6% – 4%. My friends are now asking themselves and us if they are idiots to keep paying their mortgage. I fully agree that this will become more and more common. The funny thing is that my wife and I couldn’t care less if the bank wants to limit their costs by giving away money ( compared to foreclosure ) or that the home owner gets away with living free for almost a year and now are allowed to keep a home he can’t afford but it really gets under the skin of the neighbours…maybe enough to start an epedemic. $200k is nothing to sneeze at.

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  6. 6
    F says:

    Back to April 1999 prices (inflation-adjusted)! Party like it’s 1999.

    Rate this comment: Thumb up 0

  7. 7
    mdgouda says:

    In 2009-2010 was also small decrease compared to previous year. Was that bottom too?

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  8. 8

    RE: mdgouda @ 7 – A graph of the past never shows you the future. If it did, we’d all be rich!

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  9. 9
    Thomas Mercer says:

    Upwards movements in rent and declining purchase prices are two trends that can’t both continue much longer without something breaking loose.

    http://www.seattlepi.com/realestate/article/Apartment-vacancies-hit-five-year-low-3436201.php
    King County’s market vacancy rate is 4.1 percent, down from 4.6 percent last fall and the lowest since spring 2008.

    “Job growth has been picking up steam,” Dupre + Scott’s Mike Scott said via email Monday, referring to reports from Seattle’s Conway Pedersen Economics.

    Also, he added, “consumers staying with rental housing longer than historically typical due to continued concerns about home buying.”

    As you’d expect, the lower vacancies are translating to higher rents. The average rent is now $1,178 in Seattle and $1,098 countywide. That’s up 1.1 percent, in both cases, from the fall and 5.4 percent and 4.7 percent, respectively, from a year ago.

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  10. 10
    John Bailo says:

    Portland is dropping like a brick — and their prices were already half of ours to begin with!

    Wonder if that impacts the decisions of the crowd that could live in either city — and there are many who consider Portland to be the superior choice if you’re one of the Light Rail-Density-City-Bicycle-Walkability crowd.

    Seems like there would be a southbound Hipster Drain going on.

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  11. 11
    Dweezil says:

    RE: ray pepper @ 3
    Its as solid of a bottom as what David Copperfield uses in his props.
    There’s no way it could open up. Tap tap! See? Solid plywood. Oh wait, why are those bankers messing with that latch…

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  12. 12
    ChrisM says:

    RE: John Bailo @ 10 – I live outside of Portland. Unemployment in Portland is worse than Seattle, and I suspect median household income is significantly less as well. Housing here isn’t a bargain (yet).

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  13. 13
    Dave0 says:

    Assuming that the YoY change continues to increase at a rate of 0.25% per month (about what it has been doing since March 2011), here is what future Seattle index values could look like:
    Month Value YoY Change
    February 2012 127.90 -3.72%
    March 2012 128.35 -3.47%
    April 2012 130.78 -3.22%
    May 2012 132.50 -2.97%
    June 2012 133.72 -2.72%
    July 2012 134.17 -2.47%
    August 2012 134.04 -2.22%
    September 2012 132.91 -1.97%
    October 2012 131.91 -1.72%
    November 2012 130.70 -1.47%
    December 2012 129.39 -1.22%
    January 2013 128.76 -0.97%
    February 2013 126.98 -0.72%
    March 2013 127.74 -0.47%
    April 2013 130.49 -0.22%
    May 2013 132.54 0.03%
    June 2013 134.09 0.28%
    July 2013 134.87 0.53%
    August 2013 135.08 0.78%

    I find this interesting because, if this plays out, values would start increasing after February, making it appear as if values have bottomed out. However, values would begin to fall again in August, with the true bottom appearing in February 2013.

    Of course, many events could happen that would change this course of events, including if The Fed decided to raise interest rates, causing mortgage rates to climb, causing downward pressure on home prices.

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  14. 14
    mdgouda says:

    RE: Kary L. Krismer @ 8

    I know you want to tell the prices will never be back to 2007 peak. But I was thinking sort of repetition.

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  15. 15

    RE: mdgouda @ 14 – Huh? Things don’t tend to repeat in a predictable manner either.

    Maybe I’m not following what you’re trying to say.

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  16. 16
    ARDELL says:

    RE: patient @ 1

    Current Spring Bump, for the last 30 days, is running at 3% up compared to 1st Quarter YTD on a combined basis. Of course we’re not at end of March yet, but the bump has already begun. The market is not in “up” mode until the year ends in December of 2012 higher than where it started on Jan 1 of 2012 (December 2011 number).

    To do that the bump period has to jump high enough not to lose all of its upward momentum in the 4th quarter down swing.

    Talking King County Single Family homes…

    (required disclosure: stats not compiled, verified or published by The Northwest Multiple Listing Service.)

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  17. 17
    Scotsman says:

    Inflation walks hand-in-hand with currency devaluation. I expect U.S. wages to start to rise, increasing domestic purchasing power (and home prices) even while imports get increasingly expensive but demand for U.S. products and production improve. This is their plan.

    The only caveat is whether the powers that be can continue to walk the fine line between insolvency and insurrection.

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  18. 18
    Darby says:

    I live inside of Portland, and there is definitely a shortage of good houses for sale here, at least in the inner neighborhoods. Maybe not as big a shortage as in the desirable Seattle neighborhoods, but the rental market is probably tighter here. I’d agree that something has to give, and would not be surprised to see house prices trending higher by the Spring.

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  19. 19
    The Desponder says:

    RE: Scotsman @ 17 – Scotsman, I think you hit the nail on the head. DOW is up. Brent is up. CPI is up. Is it any wonder that housing appears to be turning a corner, and companies appear to be in a stronger position? But Bernanke just admitted a day or so ago that easing policies would remain in effect because of underlying weakness. He actually seemed pretty down, even though his plan appears to be working.

    If inflation can be managed and controlled then perhaps the easy money policies will be vindicated. However, if inflation gains steam and interests rates are adjusted that could easily have a negative impact on housing, just as the 2013 foreclosure pipeline appears to be impacting the overall housing picture.

    So, in the nitty-gritty of the real world: If a family had just managed to pay down their principle enough that they were no longer under-water and could sell a house which in three to five years they would certainly need to sell because of job and family growth, is spring/summer 2012 the window of opportunity to get out? Or, will the policies of the economic planners continue to walk that fine line ‘between insolvency and insurrection’ successfully?

    Those are the tough questions that some homeowners are starting to ask.

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  20. 20
    David Losh says:

    RE: Scotsman @ 17

    You wish.

    In order for there to be inflation there would need to be volatility. Our currency is stable no matter how much borrowing we do. pfft is right about the fact we have manageable debt.

    Use some simple logic about where you would want your money today. Europe, South America, China, Russia, India, or OPEC countries are all paying returns, but is that where you would put your money today?

    We win, they lose. It was our game that collapsed the global economy, so who do you think will come out ahead?

    I think inflation was the plan, but we just can’t get there from here.

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  21. 21
    David Losh says:

    RE: ARDELL @ 16

    That’s like saying the house down the street sold for $400K, so my house is worth $400K.

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  22. 22
    ARDELL says:

    RE: David Losh @ 21

    ??

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  23. 23
    David Losh says:

    RE: ARDELL @ 22

    You’re correctly pointing out that end of year is the only thing Case Schiller actually tracks.

    Case Schiller is a big waste of time. It’s an index that was going to be some what predictive, but is now just sales hype; something to talk about.

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  24. 24
    ARDELL says:

    RE: David Losh @ 23

    Hi David,

    …the stats are for King County…Case Schiller doesn’t separate King County. They call Pierce, King and Snohomish Counties “Seattle”.

    The numbers I posted are the ones I track. Single family King County. If you look at any long term historical data, you can compile it yourself, a year that ends higher than it started is the beginning of a prolonged upward trend. Same on Dec 31 as Jan 1 twelve months ago, is a flat market.

    All years will have a Spring Bump. But if the bump is strong enough to not dissipate by year end, then you are in an upswing.

    Not sure what you are referring to, but no, I’m not regurgitating someone else’s data.

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  25. 25
    pfft says:

    By Scotsman @ 17:

    Inflation walks hand-in-hand with currency devaluation. I expect U.S. wages to start to rise, increasing domestic purchasing power (and home prices) even while imports get increasingly expensive but demand for U.S. products and production improve. This is their plan.

    you said currency devaluation wouldn’t work because it would be offset by inflation?

    do you realize that I read most comments and remember just about everything people write?

    for example:

    “The only caveat is whether the powers that be can continue to walk the fine line between insolvency and insurrection.”

    1. our interest payments are a % of gdp are low low low. how many times do I have to post this link?

    the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let’s call it $250 billion. That’s about 1.6% of American output, which is lower than at any point since the 1970s – except for 2003 through 2005, when it was closer to 1.4%.

    http://moneyland.time.com/2011/07/15/the-u-s-is-not-drowning-in-debt/#ixzz1qNO8RzdA

    2. you were for the extension of the unfunded bush tax cuts for the rich that will add $3 trillion to the defict over the next 10 years…until the checks bounce of course.

    if we repeal the bush tax cuts for the rich out debt levels stabilize.

    http://www.cbpp.org/images/cms//5-10-11bud-f2.jpg

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  26. 26
    pfft says:

    why is everyone making such a big deal about case-shiller? don’t you guys usually ignore the case-shiller numbers in favor of core logic or whatever? or are you citing these numbers because they aren’t good?

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  27. 27
    David Losh says:

    RE: ARDELL @ 24

    Spring bump? You mean the time when people over spend for property so the kids can be in the “right” school district? People over spend every Spring, the difference in the past few years is that they are spending into a declining Real Estate market with no hope of recovering the losses.

    It’s like saying that an individual paid $400K for a house so the other houses on that street should be $400K.

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  28. 28
    SG says:

    And isn’t Case Shiller an average over the last 3 months? While averages are usually good and smooth out any bumps, it’s doesn’t fully reflect the bounce we have seen in the last month or so.

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  29. 29
    David Losh says:

    RE: pfft @ 26

    The Real Estate community quotes these numbers because they are really good, and totally misrepresent the market. These numbers make the Real Estate market look stable when it is in a free fall. There just isn’t enough data, yet, to show what has happened to pricing.

    Based on this Case Schiller sales hype people are over paying like crazy. You take this data, mix it with “historically low” interest rates, and you have long term debt. You mix long term debt, with student loans, car payments, and consumer credit, to make up our financial markets. That is the profits the stock market depends on. It’s a circle.

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  30. 30

    By pfft @ 26:

    why is everyone making such a big deal about case-shiller? don’t you guys usually ignore the case-shiller numbers in favor of core logic or whatever? or are you citing these numbers because they aren’t good?

    Too much attention is always given Case-Shiller here. I’ve been arguing for a long time that it’s too much attention, because it always tells us what we new months earlier from the NWMLS median data.

    C-S and the NWMLS numbers are about the only things discussed here regularly. The press reports on 2 or 3 others to some extent.

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  31. 31

    By SG @ 28:

    And isn’t Case Shiller an average over the last 3 months? While averages are usually good and smooth out any bumps, it’s doesn’t fully reflect the bounce we have seen in the last month or so.

    Correct, but that wouldn’t affect comparing two different years of C-S data.

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  32. 32

    By David Losh @ 29:

    The Real Estate community quotes these numbers because they are really good, and totally misrepresent the market. These numbers make the Real Estate market look stable when it is in a free fall. There just isn’t enough data, yet, to show what has happened to pricing..

    Hardly. The numbers overstate the fall in prices because C-S can’t account for short sales and REOs.

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  33. 33
    ricklind says:

    By patient @ 5:

    RE: ray pepper @ 3
    Right on Ray. It’s already happening, at a dinner party last weekend we had a couple complaining about how their neighbour stopped paying a mortgage of about $800k that he can easily afford. He took a risk and won. He got a write down of $200k and a change of interest rate from 6% – 4%. My friends are now asking themselves and us if they are idiots to keep paying their mortgage. I fully agree that this will become more and more common. The funny thing is that my wife and I couldn’t care less if the bank wants to limit their costs by giving away money ( compared to foreclosure ) or that the home owner gets away with living free for almost a year and now are allowed to keep a home he can’t afford but it really gets under the skin of the neighbours…maybe enough to start an epedemic. $200k is nothing to sneeze at.

    Not to be repetitive of previous discussions, but as I understand it the mortgage contact stipulates that the buyer will pay the mortgage, and if they don’t, then the lender has the right to foreclose on the property and own it. As has been pointed out here, “good” business practice indicates that it is sound business to walk away from unfavorable business situations. In this light, the “homeowner” is fully justified in treating the home purchase just like any other business decision. So, I do not fault your dinner party couple at all, and would not hesitate to do the same thing. It’s just bidness. I would do it in a heartbeat.

    But, big JLo butt, in business the principals realize they will most likely encounter one another down the road, and so are incentivized to make sure the other party is willing to come back and play again. My perspective is that in the housing/mortgage market the playing field is so uneven, the banks are so big and the peons so small, that these business rules do not work in the homeowner/lender environment. But now the mortgage lenders are realizing they have to unwind some of their customers debt, if they want current and future customers, and are so, so very happy to have .gov taking part of the burden.

    I think we are somewhere in the middle of the great unwinding, and redefining of the buyer/lender relationship.

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  34. 34
    ricklind says:

    By Kary L. Krismer @ 30:

    By pfft @ 26:
    why is everyone making such a big deal about case-shiller? don’t you guys usually ignore the case-shiller numbers in favor of core logic or whatever? or are you citing these numbers because they aren’t good?

    Too much attention is always given Case-Shiller here. I’ve been arguing for a long time that it’s too much attention, because it always tells us what we new months earlier from the NWMLS median data.

    C-S and the NWMLS numbers are about the only things discussed here regularly. The press reports on 2 or 3 others to some extent.

    Kary, Interesting thoughts. So how would you re prioritize? Th C-S stats are national and comparative and provide the same metrics month to month and are reliable. The MLS stuff is less reliable, true? As a “reasonable” person looking at housing data, where would you suggest someone like me look and how should I prioritize?

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  35. 35
    Scotsman says:

    RE: David Losh @ 20

    “Our currency is stable no matter how much borrowing we do. pfft is right about the fact we have manageable debt. ”

    To quote a friend- “you wish.” It’s all around you David- look at the data for CPI, dollar devaluation, etc. Sure, other ships of state are sinking too, and it’s sometimes hard to tell who might hit the bottom first. But not all ships are sinking- much of SE Asia, Australia, parts of Europe, the middle east, many of these are doing much better.

    And the debt- “manageable?” It’s a trap, waiting to be sprung the moment those with the cash decide the game is over and they want their realistic returns/interest.

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  36. 36
    Scotsman says:

    RE: pfft @ 25

    “you realize that I read most comments and remember just about everything people write?

    for example:

    “The only caveat is whether the powers that be can continue to walk the fine line between insolvency and insurrection.”

    Wow- a mind like a steel trap. The very definition of an eidetic memory. I bet you didn’t even have to look back 8 posts . . . .

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  37. 37
    Scotsman says:

    RE: Kary L. Krismer @ 30

    “it’s too much attention, because it always tells us what we new months earlier from the NWMLS median data.”

    MEDIAN?!? Oh, don’t let me get YOU started! ;-)

    Now, does NWMLS data go back to 1890 or so? On a national basis? And thus provide the very definition of a baseline for any current price shifts? Oh, I see. That’s why we have CS.

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  38. 38
    David Losh says:

    RE: Kary L. Krismer @ 32

    Read your own comment. Short sales, and REOs are selling for fair market value, and those numbers will continue to drop. Any one paying more than the price of a short sale or REO is over paying for property.

    The Real Estate market is in free fall, and is only being propped up by wishful thinking.

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  39. 39
    David Losh says:

    RE: Scotsman @ 35

    The CPI is going up because the price of gas is going up. I would call that a false sense of inflation because wages won’t rise to cover that cost. Do you really think oil company profits will increase wages?

    The United States government invested stimulus dollars, as much as no one wants to admit that. We are only churning dollars inside our own bond market, investments in GM, banking, mortgages, financial markets, and manufacturing of military goods because no one else will.

    We are in a weird place where our government is busy investing in infrastructure of the economy, while the private sector is insuring against consumer credit losses so they can make more money for doing absolutely nothing.

    The Euro is dead, as is the Rupee, Ruble, and Yuan. We are the dominate currency because our government is investing in itself. There is major global currency flight, and it is headed our direction because we have already bitten the bullet.

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  40. 40
    Axion44 says:

    Lots of dismissive talk about the national debt and servicing the debt in this thread. Common sense says you can’t keep borrowing ~40% of what you spend. You can cite all of the “think tank” websites you want that advocate for more government spending and less worrying about the debt, but it doesn’t register with sane people. Our government is not immune from basic rules about fiscal discipline. When you include in the national debt our underfunded obligations such as Social Security, MediCare, etc. and state and local obligations we are approaching a cliff.

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  41. 41
    StillRenting says:

    RE: Kary L. Krismer @ 32

    I don’t understand why you think short sales and REOs should not count in house pricing data. If those houses could have sold for a higher price, wouldn’t they have done so, either before or after becoming short sales/REOs?

    It’s my understanding that short sales and REOs often sell for prices that are lower than non-distressed properties because many of them have defects related to being a short sale/REO (deferred maintenance, damage from foreclosed homeowners, damage from looters/squatters, as-is sales agreements, etc.) It seems to me that including short sales and REOs in the data more accurately represents the actual depreciation of assets in the housing market. When there are more foreclosures and short sales, more houses suffer from conditions that depreciate their value. When there are fewer short sales and foreclosures, fewer houses suffer from those same conditions.

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  42. 42

    By ricklind @ 34:

    Kary, Interesting thoughts. So how would you re prioritize? Th C-S stats are national and comparative and provide the same metrics month to month and are reliable. The MLS stuff is less reliable, true? As a “reasonable” person looking at housing data, where would you suggest someone like me look and how should I prioritize?

    First, I wouldn’t read too much into any of this data, other than in indication of the basic health of the market. Currently the numbers are indicating the market is not very healthy, but perhaps not as unhealthy as a few years ago (even though the numbers are useful). Back in 2007 you could argue those very high numbers also showed an unhealthy market, but for totally different reasons. What you could never do with any of those numbers, which many people try to do, is say to yourself: “I bought my house for W when the data value was X, the data is now Y, so my house is worth Z.”

    Second, both the NWMLS median and C-S have problems, but they are different problems. Both are apparently affected by mix (not 100% clear on C-S). Both cover too large of an area (larger for C-S). C-S is untimely. Which is the reason for the first point and gets me to the third point.

    Third, if you’re really interested in what the market is doing, you’re probably interested in a particular property. It is possible to appraise the value of a house at prior times in history. Doing that would be the best way to go, because it would cover the type of house you’re actually interested in, in the neighborhood you’re interested in.

    Finally, the median and C-S are very highly correlated. To the extent one varies from the other it’s often due to the fact that the median is one month’s data and takes a large move, while C-S is a three month moving average. So I wouldn’t say one is more accurate than the other, because they are very similar.

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  43. 43

    RE: Scotsman @ 37 – If you believe that the C-S data, compiled decades after 1890, is accurate back to 1890, I have a bridge to sell you.

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  44. 44

    By David Losh @ 38:

    RE: Kary L. Krismer @ 32

    Read your own comment. Short sales, and REOs are selling for fair market value, and those numbers will continue to drop. Any one paying more than the price of a short sale or REO is over paying for property.

    The Real Estate market is in free fall, and is only being propped up by wishful thinking.

    Rather obviously you don’t understand real estate, or the terms of an REO sale. I hope you’re not advising buyers and sellers in this or any other market.

    1. The price paid for property depends on it’s condition.

    2. The price paid for property depends on the terms of sale.

    3. The price paid for property depends on how much uncertainty there is about the property at issue.

    REOs are almost always in bad condition, even if they have been freshly painted and carpeted to make them look good. REOs almost always have very buyer unfriendly terms, like limited inspection rights and the loss potentially of more than your earnest money if you back out. Often you don’t even know what the terms are when you make your offer. Because of that, REOs have a lot more uncertainty about the property.

    Short sales are also typically in bad condition, although not necessarily as bad (either as a percentage of units are as to quality). The terms of sale on a short sale are that you don’t know when it will close and you can assume almost no repairs will be made (repairs you don’t know about until after you make an offer and typically after the bank accepts). Again, due to that, you have a lot of uncertainty. Also, due to the unknown time of sale you have a lot fewer potential buyers of a short sale, and fewer buyers means less demand. Less demand means lower prices.

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  45. 45

    By David Losh @ 39:

    The CPI is going up because the price of gas is going up. I would call that a false sense of inflation because wages won’t rise to cover that cost.

    Close. It’s not inflation because the value of one commodity rising is not inflation. Unfortunately, the impact of that one commodity rising can greatly affect the CPI, which makes the CPI an imperfect gauge of inflation.

    Unfortunately in the 70s the government was fighting phantom inflation caused largely by the rise of one commodity. That brought us stagflation.

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  46. 46

    RE: patient @ 4 – Baby Boomers Will Likely Not Be Retiring Soon in Droves With 0% 401Ks

    But some are dying off and leaving kids inheritance [their old homes and savings]….money you didn’t have to work for would likely be put into real estate more easily than cash earned from working over decades. Folks that get inheritance aren’t necessarily savvy investor types either, so are an inconsistent role model to copy.

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  47. 47

    By StillRenting @ 40:

    RE: Kary L. Krismer @ 32

    I don’t understand why you think short sales and REOs should not count in house pricing data. If those houses could have sold for a higher price, wouldn’t they have done so, either before or after becoming short sales/REOs?

    It’s not that I don’t think they count, it’s that I think they affect the numbers. It’s sort of like how if the median size of a house increases, that affects the median price. That means the median price from two periods are not necessarily comparable, and that is more likely to be true the further apart those two periods are. The same is true of C-S.

    I’m not sure I understand the question in the last sentence. How would a house that is a short sale sell for more than it would have as a short sale if the owner didn’t try to sell it as a normal sale before it became a short sale?

    In any case, I was just looking at a property recently where it was a short sale at time of cancellation for about $225,000. The bank then tried to list it as an REO for about $240,000, and then dropped the price repeatedly down to about $180,000. I don’t remember whether the short sale listing was ever pending sale, but assuming it was in that type of situation the bank might have very likely said no to a price that was in excess of what it will ultimately receive for the property (ignoring even the loss of interest income). That’s because the bank had unrealistic beliefs as to the value of that house.

    It’s my understanding that short sales and REOs often sell for prices that are lower than non-distressed properties because many of them have defects related to being a short sale/REO (deferred maintenance, damage from foreclosed homeowners, damage from looters/squatters, as-is sales agreements, etc.) It seems to me that including short sales and REOs in the data more accurately represents the actual depreciation of assets in the housing market. When there are more foreclosures and short sales, more houses suffer from conditions that depreciate their value. When there are fewer short sales and foreclosures, fewer houses suffer from those same conditions.

    I agree with a lot of that. The problem is most people outside government don’t really have any reason to care about “the actual depreciation of assets in the housing market.” They care about the value of a given house at a given point in time. If the house they care about has been well maintained, both the NWMLS and C-S data would overstate the decline in value for that house. If the house they care about has a hole in the roof and mold throughout the house, the NWMLS and C-S data would understate the decline in value for that house.

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  48. 48
    Blurtman says:

    RE: ricklind @ 33 – Right. If you have good income, and previously good credit, and you walk away from an underwater home, why shouldn’t you be able to take out another mortgage to buy another home, just like a corporation can? Although there sems to be an expectation that the consumer will be the ultimate backstop bagholder, perhaps market realities will change this practice.

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  49. 49
    David Losh says:

    RE: Kary L. Krismer @ 43

    When short sales, and REOs became a market segment, a significant market segment, they had to be counted. You can not escape it, or ignore it, and you can’t make a blanket statement about condition. I don’t think you can even use the term distressed. The market is what it is, and right now some people are getting out of the market before they become short sales, or REOs.

    If some one wants to make a lateral move, or downsize, or sell to invest for cash, great. If some one wants the cash out of one property to maximize the leverage they can get at today’s rates, great.

    The bottom line is that housing units are taking a beating in value that is yet to be realized. As more, and more, and more rental units come on line, when rents become stable, and fall, the value of housing units will go down. It’s a cycle that has another two or three years to stabilize.

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  50. 50

    By David Losh @ 48:

    You can not escape it, or ignore it, and you can’t make a blanket statement about condition..

    I’m not trying to ignore it. I’m trying to point out how it’s affecting the numbers. By refusing to see that, you’re the one ignoring something and in denial.

    The part of your statement I put in bold is laughable. Seemingly you have little or no experience with REO properties, other than cleaning them out. Have you in the past three years ever had a buyer make an offer on an REO and do a professional inspection on the property? I’d also ask how many REOs you’ve even walked into recently, because many of the condition issues are obvious, while some conditions would require an inspection (especially on winterized properties). The bad condition is not as obvious as two years ago, but still often rather obvious.

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  51. 51
    David Losh says:

    RE: Kary L. Krismer @ 44

    This isn’t the 1970s. We have a different landscape today with a growing population. Scotsman brought up SE Asia, and I threw in India. In the 1970s the United States was coming out of a period of a “working” middle class. As much as any one would want to believe a middle class in countries of extreme poverty can happen, it won’t.

    The United States is a new country with a new economy based on the industrial, and technology revolutions. We don’t have thousands of years of a farming for market economy that is being completely disrupted. We’ll dominate based on the security of our safety net system. We will never deal with extreme poverty issues here, while other countries will struggle.

    The United States also has resources that Europe does not have. We can survive with our oil reserves, or open up trade with Mexico, and Canada. We are in the New World, and that makes us a pretty safe bet.

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  52. 52

    By Kary L. Krismer @ 41:

    First, I wouldn’t read too much into any of this data, other than in indication of the basic health of the market. Currently the numbers are indicating the market is not very healthy, but perhaps not as unhealthy as a few years ago (even though the numbers are useful).

    That last sentence should have ended: “(even though the numbers are now lower).” What I was trying to reference was the rate of decline.

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  53. 53

    RE: David Losh @ 50 – I agree this isn’t the 70s. I was just trying to point out why the rise of a commodity isn’t inflation, and used oil in the 70s as an example.

    Purchasing gold isn’t part of the CPI, because it’s not a monthly activity for the average American. But I don’t think anyone would argue that the rise in the price of gold is inflation (as opposed to perhaps being caused by the fear of inflation).

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  54. 54
    David Losh says:

    RE: Kary L. Krismer @ 49

    Well, I see hundreds, and that is the point, it’s hundreds. Some of those units are walk aways, but many were held by people who intended to tear them down.

    It really makes no difference about condition. It’s all based on the numbers, or return on investment. In most cases there is little, or no return on that investment.

    People need to be very careful in today’s market. You’re talking numbers when people should look at what the return on an investment is for a housing unit. It’s not good, except as a rental, and that is very dicey in your area.

    Condition is only relevant on an individual property. It does lower to offer price, so that goes back to a declining market.

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  55. 55
    David Losh says:

    RE: Kary L. Krismer @ 52

    Inflation would need to raise wages, which we won’t see this time around.

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  56. 56

    RE: David Losh @ 54 – You could argue which is affecting which (does inflation raise wages or do higher wages cause inflation). But regardless, even if you had what you consider inflation, if you had an event where the supply of oil was artificially reduced as in the 70s, the CPI would overstate the inflation present.

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  57. 57
    David Losh says:

    The only reason that I addressed this thread is because it is all Real Estate sales hype. The threads here lately are dominated by Real Estate agents, and developers/investors who want to instill a very false sense that we are at a “bottom” of a very sick market place.

    Buyers should be extremely careful of information they get about Real Estate from the internet. The internet is dominated by Real Estate schills that will tell you anything in order to get you to buy.

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  58. 58

    RE: David Losh @ 56 – I would agree with most of that. Note that I have not said we’re at a bottom.

    I will however note a very major change in the market. Starting in late 2007 it became more and more risky for the move up buyer to buy the new house before selling the old house. Thus many people either stayed put, or sold on terms which allowed a closing date far enough out to be able to find and buy another house.

    That is now changing. If your house is in decent condition and there is little or no non-distressed competition, it’s much safer to buy a new house first. Not only is it now more likely your house will sell quickly, but in addition depending on the market it’s now much more difficult to find a replacement house that would even be described as adequate. Selling first might leave a seller homeless (renting), which is an entirely new risk to selling first.

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  59. 59
    MichaelB says:

    RE: F @ 6

    Yes, but not wage-inflation adjusted.

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  60. 60
    MichaelB says:

    RE: Axion44 @ 40

    This is true in the long run but not in the short run.

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  61. 61

    […] be the first to point out that I was wrong. Back in March when January’s data came out (and prices were still hitting new lows), I said that “I would not be surprised to see us hit […]

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