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.

14 responses to “Case-Shiller: Home Prices Weakest Since Early 2012”

  1. Kary L. Krismer

    On the C-S topic of area we were discussing in another thread (three county versus local area), I just did a search in a small part of Tacoma and only about 1/3rd of the listings (11 of 29) were non-distressed. It’s still 2010 down there.

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  2. Shoeguy

    Prices lag sales. We need a good 20% drop in prices to bring things back into balance until incomes can catch up.

    You can’t have a 25% jump in house prices in a single year while incomes don’t move and not have any consequences. Prices will always struggle to maintain equilibrium with incomes, and right now they’re way off.

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  3. Glaciers

    RE: Shoeguy @ 2
    Seems like you could also make a case for the opposite. Median household income in King County appears to be flat with not a lot of change since 2008. Housing prices have decreased significantly. Maybe housing prices need to catch up with incomes.

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  4. Kary L. Krismer

    RE: Glaciers @ 3 – Or maybe there really hasn’t been that much change. Everyone likes to work off the peak, but the median in 2007 started at about $430,000 then quickly went up to $481,000 and then quickly dropped back down to $435,000 at the end of the year. Since June we’ve been between $427,500 and $405,000, but if you look at the non-distressed median it’s been at about that level for probably at least two years.

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  5. mike

    RE: Shoeguy @ 2 – Maybe it’s just that wealthier people are the ones buying lately. Seems to be the case in the north end, and down south there’s a lot of investor activity.

    Back in early 2007 I was out at a bar shooting pool and ran into a guy that was about 22, working construction who’d just bought a house. Everyone I’ve met that bought recently is 30-40’s and has a white collar job. We did have one younger guy buy recently on our block, but he’s a manager for a certain local multi-Grammy winning musician so I doubt he’s scraping by.

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  6. whatsmyname

    “…the weakest level we have seen in this measure since February 2012.”
    Wasn’t February 2012 the month before the big 19 month price run up?

    RE: Shoeguy @ 2
    Pattern recognition game:
    Shoeguy says 1 year price increase is 25%; CSI says its less than half that.
    Shoeguy says 15 year price increase is 200%; CSI says its less than half that.
    Shoeguy says 8 inches; Mrs. Shoeguy says ?

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  7. Shoeguy

    Not really, Glaciers. It was universally accepted that in the time leading up to 2008 that prices had completely detached from incomes. Prices after the crash started racing down to equilibrium, so the Fed stepped in and dropped interest rates to effectively zero in order to stop the hemorrhaging and prevent more foreclosures. This led to Wall Street taking advantage of ZIRP and buying tons of houses out from under first time buyers and driving prices back up to near Bubble Peaks.

    Yes, Mike. This is exactly what we’re seeing now. The sale of homes over $700,000 are up something like 26% year over year. Again, though, not surprising considering since 2008 the rich have gotten much richer while the middle class have suffered because Fed policy has been intentionally favoring the 1% for the last six years.

    Whatsmyname. I looked up San Francisco home prices. Median home prices in San Francisco have tripled since 1996, not 1999. Wow…..you got me.

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  8. whatsmyname

    RE: Shoeguy @ 7
    So even if you change the subject from Seattle to San Francisco, you are still wrong.

    (And let me save you that first attempt: You’ve been clearly conversing with multiple people about the Seattle market without trying to differentiate that you are talking San Francisco, including when it would have helped your case.)

    As someone said, “Numbers don’t lie.”
    But liars lie,
    …about numbers.
    Pathetic.

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  9. Kary L. Krismer

    Someone here in another thread said it best–but I don’t care to find it right now. The point was though that median income isn’t all that relevant because not everyone is in the market to buy a house. So if you’re going to look at median income, it should be the median income of home buyers. People not in the market do not drive prices.

    Also, income isn’t necessarily what is used to buy a house. Some people use assets (cash). So that would drive the median price of a house above what the median income of home buyers could support.

    And then when you get to fairly highly populated areas, surrounded by water with a fairly vibrant economy (e.g. tech) nearby, you might has well throw median income totally out the window because you’ll have a fairly small group of people driving the market.

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  10. JWS

    RE: Kary L. Krismer @ 9

    Totally agree. Median income is only part of the equation for people buying homes in expensive urban areas like Seattle. Most people spending $500k+ on a house have assets (not just income).

    The S&P 500 is up 175% from its 2009 low. Last year alone it was up 30%.

    Not to mention the techies with appreciating stock options, restricted shares, or employee stock purchase plan shares. There is a lot of money out there and income is only part of it.

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  11. Erik

    Shoe salesman: When there is a big jump for no apparent reason, it will most likely be corrected. I will be waiting in the shadows ready to pounce on someone’s home.

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  12. drshort

    It’s the upper 30 – 40% of household incomes that drive housing prices, not the median. Those are the people active in the housing market setting the value. This is why cities like SF, NY, Honolulu, and LA can have such crazy high housing prices while the median is somewhat muted. Those cities have a lot of high earners (and assets, stocks, etc.), but the median doesn’t tell you that because they also have a lot of lower income households too. In median statistics, one homeless guy cancels out a multi-millionaire.

    This is also why you see cities in the south and midwest with decent median incomes but relatively low housing prices –> they don’t have big segments of rich households driving up prices.

    On a national level, the average front end DTI for closed mortgages is around 25. It’s up a little over the last 18 months, but not a lot. We’re still a long way away from what was going on in 2006/7.

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  13. Kary L. Krismer

    By JWS @ 10:

    RE: Kary L. Krismer @ 9

    Totally agree. Median income is only part of the equation for people buying homes in expensive urban areas like Seattle. Most people spending $500k+ on a house have assets (not just income).

    “In November there were approximately 39 sales of SFR houses in Seattle over $1,000,000. Checking the county records, roughly 25% of those sales were cash purchases. That is lower than I expected. There were 13 sales where the purchaser borrowed 80% or more of the purchase price, and three transactions where the purchaser obtained a first and a second mortgage. Those numbers are higher than I expected.”

    That was the second post in our relatively new Facebook page.
    https://www.facebook.com/karyandchina

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  14. Kfhoz

    By Kary L. Krismer @ 9:

    Also, income isn’t necessarily what is used to buy a house. Some people use assets (cash). So that would drive the median price of a house above what the median income of home buyers could support.

    Or people with assets might drive the prices lower. Many people whom I know “with assets” did not get that way by paying to much for things like houses.

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