Posted by: Timothy Ellis (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.

24 responses to “Poll: A year from now, Seatle’s Case-Shiller Index will be ___ than it is right now.”

  1. Pegasus

    What time frame?

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  2. Kary L. Krismer

    I don’t recall the entity Fiserv, but according to this article they provide the C-S data and their economist is making these types of predictions. Oh boy! /sarc

    http://seattletimes.nwsource.com/html/jontalton/2018184952_biztaltoncol13.html

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  3. Kary L. Krismer

    RE: Pegasus @ 1 – None specified, so eventually everyone will be right! ;-)

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  4. Scotsman

    RE: Kary L. Krismer @ 3

    Only those who actually make a prediction. Come on Kary- you’re “at bat.” What do you think?

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  5. whatsmyname

    “less often cited”?

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  6. AxlRose

    Is this a Jedi mind trick?

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  7. softwarengineer

    RE: Pegasus @ 1

    We Need Two Polls

    One Poll for Seattle Bubble Bloggers Who Bought a House after 2006.

    Another Poll for those who didn’t.

    One poll will mostly predict increase and the other poll mostly decrease in Seattle home prices.

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  8. Bob

    Depends whether you understand fundamentals, or you are just hoping for a heck of a deal.

    Is Now the Time to Buy Your First House?

    It’s been a scary few years for the housing market. But at some point, the nightmare has to end (please?). Is now the time? Should first-time home buyers consider jumping into the market?

    After all, home prices have fallen 34% from their 2006 peak and mortgage rates are hovering at or near record lows.

    On one side are those who argue that homes are more affordable than they have been in decades, based on how much monthly income a mortgage consumes and whether owning is less costly than renting.

    An uptick in home buying by investors already is under way, they say—an indication that those who wait may miss out on a good buying opportunity.

    On the other side, pessimists insist that the housing slump is far from over, and that prices will continue falling—perhaps as much as 20% or more.

    Excess inventories, they say, are the problem, and some estimate it could be four years before the market absorbs all of that extra supply.

    [Entire text of article removed by Tim. Come on, that's not okay. If you want to read the whole article, go to their site.]

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  9. Kary L. Krismer

    RE: Bob @ 9 – A link is fine. Copying an entire article is not only annoying, but it is copyright infringement!

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  10. Bob

    My apologies … I thought that i had cut/pasted the intro but it apparently got the whole article

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  11. Bob

    Getting back to the point i think that i get from the article – if you do the analysis one way, you are certainly getting a deal especially if you consider interest rates. However, if look at the fundamentals (long established trendline, inventory, household income etc), there is more to drop.

    So i will go with option2 for the poll.

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  12. JoeBlow

    I put an offer on a fixer in Bellevue that received 23 offers. As a first time buyer, it is tough to compete with investors who are just going to tear down a house and build another one, which was the case with this house.

    I think there is a ton of inventory that would like to go on the market, people just can’t afford to sell.

    Hell, we talked to some lady over the weekend that wants a 15% premium over what she paid in 2004 even though comparable houses in the neighborhood are coming in significantly lower.

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  13. deejayoh

    By Bob @ 12:

    Getting back to the point i think that i get from the article – if you do the analysis one way, you are certainly getting a deal especially if you consider interest rates. However, if look at the fundamentals (long established trendline, inventory, household income etc), there is more to drop.

    So i will go with option2 for the poll.

    I’m not sure exactly how you are reaching your conclusion based on your list of fundamentals

    – Long term pricing trendline is moving positive (see Tim’s 2nd derivative posts)
    – Inventory is at a long time low point, and low supply is typically associated with rising prices (at least when I took economics back in the day)
    – King County median household income has been rising for at least 3 years

    I’m not criticizing your opinion. I’m just curious how you came to it based on the set of data points you listed.

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  14. Newsmaxd
  15. Scotsman

    Seattle Times (Sunday) had an article that said CS would bottom this year, then increase 5% annually over the next several years for Seattle. Maybe Tim will put it up. Hey- the Times, quoting a CS rep- how could it be wrong?

    Up 5% a year for the next 4 years. Bank on it.

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  16. Bob

    RE: deejayoh @ 14
    a few reasons:
    – unemployment is still historically high
    – long-term housing prices are still too high – see argument by shilling/shiller in the reference article
    – i dont have the link handy – although household incomes are rising slightly, it cannot justify the prices. Although folks might believe it an arbitrary measure – the long standing ration is 3:1 homeprice:household income
    – risks abound for the economy – starting with Europe, a soft or hard landing for China etc. This will have ramifications for the US and corp profits and corp employment

    I cannot just make the assumption that these are regular economic times – be more and more cautious in these times, especially when folks are in a panic to competitively bid (perhaps only in areas north of 1-90).

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  17. Scotsman

    RE: Bob @ 17

    Bob- relax. The government has the banker’s backs. And you’ll get to go along for the ride. Buy two houses and rent one out. /

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  18. Bob

    RE: Scotsman @ 18
    :-) i have a half bottle of 16 year Glenlivet Nadurra in my office – perhaps i will pour myself a finger or 2 and virtually toast you.

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  19. phil

    This might help explain the housing market…
    Newgeography(.com)’s “Large Cities Rankings – 2012 Best Cities for Job Growth”, shows the Seattle-Bellevue-Everett metro area went from 32nd last year, to 14th this year.

    The index is calculated from a normalized, weighted summary of: 1) recent growth trend: the current and prior year’s employment growth rates, with the current year emphasized (two points); 2) mid-term growth: the average annual 2006-2011 growth rate (two points); 3) long-term trend and momentum: the sum of the 2006-2011 and 2000-2005 employment growth rates multiplied by the ratio of the 2000-2005 growth rate over the 2006-2011 growth rate (two points); and 4) current year growth (one point).

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  20. deejayoh

    By Bob @ 17:

    RE: deejayoh @ 14
    a few reasons:
    – unemployment is still historically high
    – long-term housing prices are still too high – see argument by shilling/shiller in the reference article
    – i dont have the link handy – although household incomes are rising slightly, it cannot justify the prices. Although folks might believe it an arbitrary measure – the long standing ration is 3:1 homeprice:household income
    – risks abound for the economy – starting with Europe, a soft or hard landing for China etc. This will have ramifications for the US and corp profits and corp employment

    I cannot just make the assumption that these are regular economic times – be more and more cautious in these times, especially when folks are in a panic to competitively bid (perhaps only in areas north of 1-90).

    I did a post once on income multiples. If you go back as far as the data will take you for King County (which is 1989) you’ll find that the worst HHI multiple ever was 3.5x and the non-bubble average was 4X – so I am not sure where the 3X argument comes from. Without any data to support it I think it is just an old wive’s tale or something to say if you are bearish about the market
    http://seattlebubble.com/blog/2009/06/01/what-does-personal-income-tell-us-about-near-future-home-prices/

    As for your link – it was Gary Schilling who is quoted, and he made the same 20% down call last year and, lets be honest, he was wrong then. Robert Shiller, on the other hand – was quoted on CNBC a couple weeks ago saying that house prices are “back to normal” – so I don’t think you should be looking to him for comfort.

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  21. HappyRenter

    The question is not just what will happen in one year. What will happen in, for example, 5-10 years from now when the baby boomers will retire? Will population growth and immigration make up for it? Also, student debt is soaring discouraging young graduates from buying a home and getting into more debt.

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  22. David Losh

    RE: deejayoh @ 21

    ■Median household income: $60,665 http://www.seattle.gov/dpd/Research/Population_Demographics/Overview/default.asp

    What I was surprised about before were the number of people who make over $100K in the Seattle area, we must have a lot of those people here, and we do: http://www.seattle.gov/economicdevelopment/pdf_files/CAI%20OED%20Indicators%20Dashboard%202011%20081511%20FINAL.pdf

    As far as Schilling we all know a year doesn’t make a housing market, but Shiller was widely quoted http://articles.chicagotribune.com/2012-04-24/news/sns-rt-us-usa-housing-reboundbre83n0sk-20120424_1_housing-rebound-high-gas-prices-robert-shiller

    “The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday.” That was April 24th 2012.

    What Shiller said in the interview you linked is we are down to normal levels without defining normal at all. The rest of his interview was pretty dismal. He also says we may well be in for a five to ten year decline in home prices.

    It’s always easy to grab some statistic and try to make something out of it, but the facts are clear. We have weak employment, uncertainty in Europe, China is a disaster, over all weakness in energy, commodities, and stocks. We never got that inflation from massive government infusion, globally, so it looks like we will need some real economic expansion, in a time when we are winding down a couple of wars.

    We’re stuck with some sticky economic troubles, that don’t look like they will be resolved, any time soon.

    So, I don’t see taking on massive amounts of debt on expensive assets, like the family home, at cheap mortgage rates as a good thing to do for the family.

    If you are making $70K, your mortgage should be $1944 which puts you at about $275K to $300K with a mortgage payment alone of about $1500.

    What can a family buy for $275K to $300K? In reality you should be much lower than that because you will want to pay it off , because that is the only way to create equity.

    So you can see that the Real Estate market place is kind of dominated by the over $100K crowd. How much inventory do we need for them when the rest of us are, “priced out forever?”

    It’s simple math that the price for housing will need to correct, lower, for our Seattle area, and probably most urban centers. You want people to have, and own housing, for all the reasons that have been widely quoted for years.

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  23. Bob

    RE: deejayoh @ 21
    Just saw this – David Losh answered the questions very well.

    In Western countries and the US in particular, we have a huge adult population issue. Taxes will have to go up significantly, Benefits will have to go down and discretionary spending by the middle and upper middle class will be significantly reduced. This will swamp existing trendlines – we need to have folks be cautious

    For instance: http://www.zerohedge.com/news/which-unsustainable-will-go-away-medicare . Please note that i am not advocating particular actions – just that very drastic measures will have to be taken across a variety of public policy issues and taxes will necessarily rise quite high.
    [Article snips]
    Of the roughly 150 million workers in the U.S., 38 million earn less than $10,000 per year, 50 million earn less that $15,000 a year and 61 million earn less than $20,000 annually. All these numbers are drawn directly from Social Security Administration payroll data.

    What we have is a system where the full-time worker to beneficiary is already 1-to-1 and the system pays out 10 times more per person than it collects in taxes. The Medicare system would need about 10 workers for every beneficiary to be sustainable. Right now the ratio is just above 2-to-1. That simply is not sustainable.

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