Seattle Price Gains Slowest of Case-Shiller Cities in August

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

Up 0.5% July to August
Up 13.2% YOY.
Down 16.6% from the July 2007 peak

Last year prices fell 0.1% from July to August and year-over-year prices were up 3.4%.

Although the month-over-month price growth slowed considerably, year-over-year growth increased again between July and August.

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):

Seattle’s position for month-over-month changes dropped from #9 in July to #20 in August, all the way at the bottom of the stack.

Case-Shiller HPI: Month-to-Month

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 August, nine of the twenty Case-Shiller-tracked cities gained more year-over-year than Seattle (the same number as July):

  • Las Vegas at +29.2%
  • San Francisco at +25.4%
  • Los Angeles at +21.7%
  • San Diego at +21.5%
  • Phoenix at +18.6%
  • Atlanta at +18.4%
  • Detroit at +16.4%
  • Tampa at +14.1%
  • Miami at +13.5%

Ten cities gained less than Seattle as of August: Portland, Minneapolis, Denver, Dallas, Chicago, Charlotte, Boston, Washington DC, Cleveland, and New York.

Here’s the 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 seventy-three months since the price peak in Seattle prices have declined 16.6%.

Lastly, let’s see what month in the past Seattle’s current prices most compare to. As of August: Still roughly September 2005.

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, 10.29.2013)


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.

13 comments:

  1. 1
    patient says:

    YoY and down from bubble peak are now very close in percentage. The return of peak bubble prices can be back in about a year from now since Janet Yellen will likely keep QE flowing. Maybe then, when all houses can be sold without a loss we can get sanity back in fiscal policy and stop treating the riches and most fortunate as banks and home owners as disaster victims.

  2. 2
    No Name Guy says:

    For some perspective: 20 years ago (Aug 1993), Seattle was 72.01 on the Case. Today, 160.4. Using the formula A = Ao * e ^(rt) (for exponential growth), worked around to calculate the rate, or r = ln (A / Ao) / t, I calculate the compounded rate of increase in Seattle prices at 4.25%. That doesn’t sound too terrible, until one goes to the BLS and their CPI calculator and realizes that a dollar in 1993 has the same buying power of $1.62 today. Using the same formula, that means CPI has changed at only 2.41% per year compounded over those same 20 years.

    If the Seattle Case Shiller increased at only CPI from August 93 to date, then it would be 111.1, or about 70% of where it is today.

    What’s my point? Those February 2012 values are looking a lot closer to what is probably a non-manipulated (e.g. no subsidy, no QE pump, no Fed suppressing interest rates, etc) price. Buyer beware – methinks that the institutional sellers out there (e.g. the soon to be former REO to Rent types) are looking for their muppet / bag holder to dump onto. Fool you once, shame on them, fool you twice shame on you.

  3. 3
    mike says:

    RE: patient @ 1 – Except at the market peak some homes were financed at more than 100% or the purchase price/current value or with loans that negatively amortized. My suspicion is most of these loans have already been modified, foreclosed or sold short by now, but there’s still the possibility people will be underwater when prices return to their peak values.

  4. 4
    No Name Guy says:

    RE: No Name Guy @ 2

    Adding on to this:
    I went to The Tim’s post on affordability.

    Q3 1993 income (blue line) looks to be about 42k / year. Current is $68,313.

    Running those numbers through the previous formula indicates that median income has grown by 2.43% / year compounded over the 20 years, nearly exactly the same as CPI.

    Picking from the same affordability chart, it appears the median house in Q3 1993 was about 160k, or about 3.8 times the then median income.

    20 years later, in Q3 of 2013 the numbers are about 425k for the median priced home, or about 6.2 times current median income.

    Back in Feb 12, the numbers look like about 315k median, 65k median income, for 4.8 times.

    Again, I’d be skeptical that the recent reflation of some of the bubble is sustainable. Buyers, if you have to buy, do so for the right reasons (e.g. a place to live, NOT an investment), have a long time horizon, buy well below your maximum and keep a super clean personal balance sheet.

  5. 5
    Tim McB says:

    RE: No Name Guy @ 4

    No Name Guy your analysis is good but this may have something to do with it:

    http://mortgage-x.com/general/national_monthly_average.asp?y=1993
    http://mortgage-x.com/general/national_monthly_average.asp?y=2013

    1993 the average 30 year fixed loan was around 7.25-7.5%
    2013 the average for 30 year has been around 4-4.5%
    I’m sure you’re aware of it but thought I’d bring it up again.

    This is why the common sense 3x annual income addage hasn’t been applicable for the last few years. During the boom it was, as Mike noted, because of crazy loans not low rates but the lat few years rates have been manipulating the market for so long we now look at it as the norm. If there’s a quick spike in rates that causes another downturn than sure, you’re right, its not sustainable. But if the fed and .gov are successful in their endeavors rates will stay low and then rise slowly minimizing downward pressure, unemployment will continue down or at least continue on its current flatline, and inflation and wage gains will meet back up with housing costs eventually. Not saying that’s what will happen but what could happen. It your a monthly payment buyer the monthly payment trumps asset value until you have to sell.
    I do agree with you “have a long time horizon, buy well below your maximum and keep a super clean personal balance sheet” is excellent advice, regardless of where the market is at and I think most of the decent gains for the area (perhaps save a few “nice” areas) are behind us.

  6. 6
    Awaken the Bear says:

    $3 for a gallon of gas.

    The real deflationary cycle is almost here. Prepare for Kondratiev winter.

  7. 7
    whatsmyname says:

    If you’d bought your LA house in 2000, you’d be well past the Seattle peak CSI right now.
    If you’d bought San Diego, you’d be right about the Seattle Peak.
    Are we still 18 months behind these guys?

  8. 8
    ChrisM says:

    RE: Tim McB @ 5 – If 3x annual income isn’t applicable, then what *is* a good yardstick?

    Also, had to share… I love how official statistics show there’s no significant income, despite the obvious repackaging of flour, sugar, coffee. Let’s add toilet paper:
    http://online.wsj.com/news/articles/SB10001424127887323971204578626223494483866

    “The number of sheets in various Cottonelle rolls recently went down by 5.7% to 9.6%, and each “double roll” now has between 166 and 216 sheets, down from 176 to 230 sheets previously. Tissue sheet count reductions for Cottonelle bathroom tissue and Kleenex facial tissue were a factor in helping net selling prices rise 2% at Kimberly-Clark’s North American consumer tissue division in the second quarter, the Dallas-based company said.”

    This doesn’t discuss the reduction in toilet roll length:
    http://blog.toiletpaperworld.com/is-my-toilet-paper-shrinking/

    More non-existent inflation: reduced packaged size:
    http://www.consumerreports.org/cro/magazine-archive/2011/february/home-garden/downsized-/downsized-products/index.htm

    I now believe America’s prosperity peaked in 1966-1971 and we’ve been in decline ever since. http://en.wikipedia.org/wiki/Nixon_shock is the classic example of America’s decline.

    Here’s another shocking example of the weakness & decline of the US dollar — average wage:
    http://www.ssa.gov/oact/cola/AWI.html

    So… home prices only go up, right?

    Right?

  9. 9
    Tim McB says:

    RE: ChrisM @ 8

    “So… home prices only go up, right?”

    Nope didn’t say that. If anything my agreeing with his suggestion: “have a long time horizon, buy well below your maximum and keep a super clean personal balance sheet” puts me more in the homes aren’t a guarantee to always go up camp. I’m not really a bear or bull in the housing market. I’m more in the “housing is a good long term hedge against inflation, oh and they’re pretty cool because they keep me dry” camp. I just wanted to point out the generally obvious effect that these ultra low rates are having and will continue to have on the market, at least until rates are raised which might not be for years.

    “If 3x annual income isn’t applicable, then what *is* a good yardstick?”

    You probably want me to say “in this day and age 5 x annual income is the *new* measure that people today are using” but I’m not going to say that because again that’s predicated on the historically ridiculously low rates we currently have. If interest rates were at 25% for a 30 year fixed loan, homes priced at 2 x annual income (let alone 3 x) wouldn’t be a good yardstick considering how much more the final cost of the home would be over years the mortgage is held. Yes, you could potentially refi later but if you look at long term rates there were several times in both the 50’s, 60’s, and 70’s where you wouldn’t have seen a rate lower than what was offered for more than a decade later.

    Instead I’d recommend two measures to think about. One, regardless of how much you put down make sure the monthly payment is less than 30% of income. Some people suggest 30% gross income, I would suggest net income instead to be on the safe side. Two, think like an investor and analyze what the place would rent for on the open market. It should be at or very near what it rents for to be a deal worth considering in this environment. Thinking about this stat (and Seattle Bubble) helped my wife and I wait 2 and half years longer to buy. Right now that’s a bit harder to find (which to me suggests that we may be overheating a bit) but over the long term, rents and new loan payments rates have a way of trending in step (with the exception of perhaps the bubblious mid 2000’s). That’s what I would (and did) use as a gauge when buying a home.

  10. 10
    No Name Guy says:

    RE: Tim McB @ 5

    Yup on what 30 year fixed rates were in the early / mid 90’s – that’s when I bought my place. That said Tim McB, you make my point.

    Since the marginal buyer (at least for those with an intent to occupy, not rent) has to finance, and since the marginal buyer is mostly concerned about payments, less so “price” except insofar as it affects payments, then to them, it comes down to the trade between price and interest rates (and to a lesser extent, term, since most folks default to 30 year). If rates go up, price MUST come down to hold the payment to what they, the marginal buyer, can afford.

    Interest rates have been manipulated down, hence prices have been manipulated up. QED.

    7-ish percent for a fixed 30 year is probably about what a true, unmanipulated “market” rate is.

  11. 11
    Tim McB says:

    RE: No Name Guy @ 10

    No Name Guy said:

    Those February 2012 values are looking a lot closer to what is probably a non-manipulated (e.g. no subsidy, no QE pump, no Fed suppressing interest rates, etc) price. Buyer beware – methinks that the institutional sellers out there (e.g. the soon to be former REO to Rent types) are looking for their muppet / bag holder to dump onto. Fool you once, shame on them, fool you twice shame on you.

    I would agree that the unmanipulated rate is somewhere between 6-7.5%, but when will we see that again? I think it could be a decade away. You seem to think it is going to happen soon and quickly and that the government will pull out the housing market it has worked so hard over the last 4-5 years to prop up. What happens if as I suggested a combination of inflation and time eats away at the “manipulated” value with a gradual walk up of rates back to historical norms as opposed to pump and dump as you describe? Its not the most sexy view but I think its been the medium term plan all along. The long term plan seems to be to destroy the dollar but thats another matter.

  12. 12
    No Name Guy says:

    I don’t know when we’ll see it. Predicting exactly when a house of cards will fall is tricky. Predicting that it WILL fall is less tricky. Take Detroit – everyone could see it was a basket case. I wouldn’t have guessed as to exactly when it would file, but could see that it must.

    After all, the Fed with their QE pump fest will be able to control interest rates right up until the time everyone loses confidence and they lose control. When will that happen? When does that critical mass of people finally wake up? When does everyone look at the stock market, look at their buddies across the way nervously, check their pockets to see how much cash they have, and then hit the sell button? Once the selling starts, it’ll be a mad dash to be an early person out the door…that I do know.

    Once the ball gets rolling, it’ll be ugly, as will the response of the Status Quo / The Powers That Be. Cue the Wiemar central bank response in the attempt to ward off the deflation response to the collapse of all “asset” prices – stocks, bonds, real estate, etc, throw in a good dose of Cyprus “bail in” wealth confiscation, which, as in Cyprus only really hit the little guys, add in a heavy dose of capital controls, and don’t count out taxes based on impugned income, so no going Galt.

  13. 13
    whatsmyname says:

    “The warning that I’ve received, you might take it with however many grains of salt you wish, that the brown acid that is circulating around is not specifically too good. It is suggested that you stay away from that. But it’s your own trip, be my guest. But please be advised that there’s a warning, okay?”

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