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: < $256,839 (up 0.2%)
- Mid Tier: $256,839 – $411,182
- Hi Tier: > $411,182 (up 0.4%)
First up is the straight graph of the index from January 2000 through August 2012.
Here’s a zoom-in, showing just the last year:
The seasonal slow-down is only affecting the middle and high tiers so far. Between July and August, the low tier rose 1.9%, the middle tier was flat, and the high tier lost 0.1%.
Here’s a chart of the year-over-year change in the index from January 2003 through August 2012.
Just as we predicted last month, the low tier inched back out of the red in August, hitting exactly the same point as August 2011. All three tiers are now officially no longer in decline. Here’s where the tiers sit YOY as of August – Low: 0.0%, Med: +1.9%, Hi: +4.6%.
Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.
Current standing is 38.9% off peak for the low tier, 29.6% off peak for the middle tier, and 22.5% off peak for the high tier.
(Home Price Indices, Standard & Poor’s, 10.30.2012)
+30
Low Inventory Data Bases Are Anomalous
Especially when compared to much higher inventory history.
Does the history graphs data showing like 3% improvements YOY during 30% drops the last 5 years when inventory wasn’t anomalous mean we’re out of woods?
Now I think I know what voodoo economics means.
Rate this comment:
0 
0
I understand that the case-schiller price index is based on previous sale prices of a home. Does anyone know what the algorithm is to calculate the case-schiller index? I have tried to google it without any luck. An empirical general formula would suffice. I would like to gain a better grasp on the case-schiller price index.
Rate this comment:
0 
0
I doubt they give their algorithms, but they do give their methodology.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3Dmethodology-sp-cs-home-price-indices.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1244140169453&blobheadervalue3=UTF-8
Rate this comment:
0 
0
RE: Kary L. Krismer @ 3 –
Thanks
Rate this comment:
0 
0
I’m not sure what exactly you would get in Seattle for less than $256,839. But I guess that I don’t really want to know ;)
Rate this comment:
0 
0
By softwarengineer @ 1:
Low Inventory Data Bases Are Anomalous – Period. Any difference is not likely to be statistically significant. Not enough data points -> student t-test is likely to tell you that any difference could be due to random fluctuations.
Rate this comment:
0 
0
By HappyRenter @ 5:
It’s the tri-county area–Snohomish, King and Pierce, so for $250,000 you can get something surprisingly nice.
Rate this comment:
0 
0
RE: HappyRenter @ 6 – The Case Schiller index has enough data points to be statistically significant. Sale counts in the Seattle area are near the median for the 2000-2012 timeframe (see The Tim’s latest graphs on the MLS reporting roundups). Each report is based on sales over a three month period–August’s paired sale count for Seattle was 4,102, compared with 3,137 for August 2011 and 2,940 for August 2010 (so are we to assume that the lower prices in 2010 and 2011 must be due to random fluctuations instead of actual market forces?). In fact, this three month period (June-Aug 2012) has more data points in it than any Case Schiller report for Seattle since 2007!
Now, a more viable claim would be that “Home prices have risen over the last year because inventories are low”, paired with a claim that “these low inventories are anomolous, and when inventories rise, that will have a downward pressure on home values”, but just because inventories are low does not mean that sales volumes are low or that the home price changes over the last year are the result of some statistical aberration or fuzzy math. Housing could (and very well may) turn downward again, especially if inventories rise dramatically; however, that would be due to market forces and not bad statistics on the part of Case-Shiller.
Rate this comment:
0 
0
RE: Ahau @ 8 – As I mentioned yesterday, inventories are low because properties are going pending. The properties that go pending are not being replaced by new active properties in sufficient numbers.
Rate this comment:
0 
0
RE: Kary L. Krismer @ 7 –
ok, thanks for the explanation. So, the word “Seattle” in the CSI graphs refers to the counties Snohomish, King and Pierce.
Rate this comment:
0 
0
RE: HappyRenter @ 10 – Correct. All of the cities listed in the Case-Shiller Home Price Indices are metro areas, not just single city limits. For full details on their geographic boundaries, hit their methodology document (pdf), beginning on page 8.
Rate this comment:
0 
0
From an engineering standpoint, you could look at housing prices in terms of the concept of momentum. Mass times velocity. Absent of extreme forces, housing prices will trend up with inflation with all tiers moving at the same velocity. When forces are applied, the low tier will be more volatile. (lots of reasons why, but it doesn’t matter, that’s the reality, It’s as if the lower tier has lower mass). Looking at the straight up graph, Feb 2012 is the inversion of July 2007. If you draw a straight line through 2000-2003, straight through the inflection point at mid 2010, that’s the trajectory you should expect prices to be at in the long run.
Based on that, I’d expect a relatively large percentage increase in the low tier in the next few years, but all tiers have some good room for upward movement….. I would predict all tiers will meet at an index of 165 around mid 2014.
Rate this comment:
0 
0
http://seattlebubble.com/blog/2012/09/21/king-county-affordable-home-price-21-higher-than-current-median-price-thanks-to-low-rates/
Same trend can be made with ‘The Tim’s affordability chart…. 2000-2003 is similar to 2010 in that affordability coincided with median price…. this chart would also predict a case schiller index of 165 in about mid 2014.
Rate this comment:
0 
0
RE: corndogs @ 12 – Absent of extreme forces? Are you kidding me? What do you consider the Federal Reserve’s unprecedented intervention over the past five years? I’d say the ‘extreme force’ is being applied right now. I’m not so sure dumbing it down to Newtonian physics is the correct approach.
Rate this comment:
0 
0
RE: softwarengineer @ 1 – “Does the history graphs data showing like 3% improvements YOY during 30% drops the last 5 years when inventory wasn’t anomalous mean we’re out of woods?”
As others have stated, there’s no reason to call the data anomalous. But, you can do a little bit of quick research yourself on Redfin for instance… August prices were flat in 2011 and 2012 so Case Schiller YOY is understandably flat for the month…. but for King County Sept 2011 through Feb 2012 median prices dropped like a rock…. So far Sept-Oct 2012 has been flat, so you know at least the next two monthly reports from ‘The Tim’ are likely to show the Case Schiller YOY significantly up…. There’s actually no good reason to believe the YOY wont continue up every month through next April even if prices decline slightly. That YOY is going to at least 10% possibly 20%. So yeah, we’re out of the woods.
Rate this comment:
0 
0
RE: wreckingbull @ 14 – didn’t say it was absent of extreme forces now…. I’m saying it was relatively absent of extreme forces in 2001-2003. It reached an inflection point in 2010.. When it is again absent of extreme forces in the future, possibly 2014 it will reach a trendline. I’m not dumbing it down, I’m talking over your head…. The post is just for other engineers, they’ll know what I’m talking about…. thanks for playing though.
Rate this comment:
0 
0
RE: wreckingbull @ 14 – “What do you consider the Federal Reserve’s unprecedented intervention over the past five years?” By the way, give it up on the interest rate thing, it’s a factor, but it is nothing compared to the factors that caused the crash.. There was a crash, accompanied by an over-correction just like anyone with a brain would expect… now prices are going back up. “The Tim” already showed how the market could absorb interest rates going back up to the 6-7% range and prices would still be in the affordable range….. You have no concept of the bigger picture…. that’s why you said prices wouldn’t go up at the end of the year and that’s why you said they would also go down after the “Spring Bump”…. you’ve just been plain wrong….
Rate this comment:
0 
0
Actually, I’ll put $50 bucks in ‘the Tim’s’ acct if he’ll overlay his affordability chart with the Case Schiller chart and extrapolate where prices would need to be in 2015 to meet the 2003 affordability (with 4% and 6.5% interest rates)….. That would be more informative than any other chart I’ve seen.
Rate this comment:
0 
0
By corndogs @ 16:
Thank you, this quote absolutely made my day. You can’t make this sh*t up.
Rate this comment:
0 
0
RE: wreckingbull @ 19 – I think Corny Doggie needs to put the crack pipe away. It is one thing to buy a distressed property at a deep discount at the seller’s obvious disadvantage. It’s another to fabricate story after story as to why he must be so smart. I label him as a first class asshole who obviously needs some serious therapy. I hear his neighbors have already grown weary of their recently arrived neighbor. Corn dogs anyone?
Rate this comment:
0 
0
RE: wreckingbull @ 19 – That’s all you got… why don’t you make some more predictions of the future…. that’s the sh#t that makes my day!
Rate this comment:
0 
0