Seattle Bubble

According to the latest data from the Case-Shiller Home Price Index, the home price bust in Seattle is gaining steam again.

Down 1.0% June to July.
Down 8.2% YOY.

Last year prices rose 0.20% from June to July, and year-over-year prices were up 6.9%.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland continues to experience a smaller “correction” than Seattle, falling 6.6% YOY in July.

Click to enlarge

This graph is not intended to be predictive. It is for entertainment purposes only.

Here’s the graph of all twenty Case-Shiller-tracked cities:

Click to enlarge

In July, seven of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle. Charlotte at -1.8%, Dallas at -2.5%, Denver at -4.7%, Boston at -5.4%, Portland at -6.7%, New York at -6.9%, and Cleveland at -8.1. The largest year-over-year drop was in Las Vegas, where prices plummeted just under 30% from July 2007.

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.

Click to enlarge

It has now been exactly one year since Seattle’s Case-Shiller index peaked, and prices have declined a total of just over 8%. One year after peaking, only two other cities had declined more than Seattle has: Tampa & Miami, at 8.8% and 17.5%, respectively.

Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Click to enlarge

Seattle’s Case-Shiller value for July 2008 was halfway between its May and June 2006 values. So far we are “rewound” twenty-five and a half months. The June to July drop puts Seattle at yet another new post-peak low, nearly two points lower than June.

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

(Home Price Indices, Standard & Poor’s, 09.30.2008)

According to the latest data from the Case-Shiller Home Price Index, the home price bust in Seattle is gaining steam again.

Down 0.2% May to June.
Down 7.1% YOY.

Last year prices rose 0.65% from May to June, and year-over-year prices were up 7.9%.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. With a drop of “just” 5.8%, Portland’s year-over-year numbers have been out-performing Seattle for seven months now.

Click to enlarge

This graph is not intended to be predictive. It’s just an interesting exercise to see how closely the Pacific Northwest is tracking the ground already covered by Southern California.

Here’s the graph of all twenty Case-Shiller-tracked cities:

Click to enlarge

Six of twenty cities experienced smaller year-over-year drops than Seattle in June. Charlotte at -1.0%, Dallas at -3.3%, Denver at -4.7%, Boston at -5.2%, Portland at -5.8%, and New York at -6.9%. The largest year-over-year drop was in Miami, where prices plummeted over 28% from June 2007. Ouch.

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.

Click to enlarge

Eleven months off our peak, the drop in Seattle has improved slightly, and is now only worse than ten of the twelve “bubble cities” were at this same amount of time from their respective peaks. Only Miami and Tampa had dropped more than Seattle’s 7.3%.

Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Click to enlarge

Well, we can definitely say that March wasn’t the bottom. The index for Seattle dropped to a new post-peak low in June at 178.28, just a hair below March’s value of 178.29. Prices have been holding somewhat steady at June 2006 levels for four months now. Will the summer and fall bring a continued drop, or is early summer 2006 as far as Seattle will “rewind”?

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

(Home Price Indices, Standard & Poor’s, 08.26.2008)

The point has been made many times here that exposure to downturns needs to be viewed in the context of how much a market rose during the boom.  I thought it would be interesting to test this by comparing the total percentage gain during the boom years to the total percentage drop from peak to date across a bunch of markets, to see if I could establish a clear relationship or correlation between the two.

For the purposes of this comparison, I used the following definitions:

• “Boom” returns are the total appreciation between 09/2001 (based on the oft cited relationship between the Fed taking down short term lending rates and the housing boom) and the peak for each market.
• “Bust” returns are the total decline from peak to the latest reported numbers.

I used the Case-Shiller report for May as the source of all the numbers. The results are kind of interesting:

Click to enlarge

This snapshot does appear to support the assertion that there is a good correlation between boom and busts cycles across markets -and that generally speaking,  the more you go up, the more you go down. But there appear to be outliers versus the trend: Namely, Detroit on the down side, and Seattle, Portland, Charlotte, and possibly New York on the up side. This is interesting to me because the relationship between up and down markets is usually cited as evidence that the Seattle market will remain relatively stable compared to other markets - when according to this view, we appear to be bucking the trend and perhaps poised for a fall.  We are down 7% to date when the trend line suggests we should be off 15-20%

What does it mean?  Who knows. There isn’t any hard and fast rule that says every market must follow all other markets, but the inverse relationship between booms and busts does appear to be pretty strong. And it certainly is the case that Seattle has not seen as much “bust” as would be expected when compared to all other markets.

Last month’s Case-Shiller data showed a slight increase in prices month to month, possibly signaling the end of the bust for Seattle. Or not. This month’s Case-Shiller Home Price Index would seem to indicate that the bust is not over yet.

Down 0.5% April to May.
Down 6.3% YOY.

Last year prices rose 0.95% from April to May, so the year-over-year figure for the index has once again set a new record as it punches through the 5% threshold.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland actually increased again in May, but still had an over 5% year-over-year decline. Both Northwest cities continue to perform worse than San Diego or L.A. did at this point in their downturn. This is most likely due to the financial crunch, which had not yet gained full steam 17 months ago.

Click to enlarge

Again I’d like to point out that this graph is not intended to be predictive. That said, it is interesting to note how closely Portland and Seattle have tracked San Diego since the first time I posted this graph just over a year ago.

And here’s the graph of all twenty Case-Shiller-tracked cities:

Click to enlarge

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.

Click to enlarge

Seattle’s drop ten months off of the peak is still larger than 10 out of the 11 other cities on the chart, including Portland. At this point in San Diego’s decline, prices were down only 1.5%, San Francisco was down 3.3%. Those cities have now seen a total decline of 29% and 25%, respectively.

Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Click to enlarge

Even with the month-to-month drop, May’s index for Seattle (178.67) was still slightly higher than March (178.29), so I guess we still can’t say with certainty that March wasn’t the bottom. But let’s just say I won’t be surprised to see the index drop again in June.

It is also worth noting that with year-over-year price drops now over 6%, two prominent local real estate insiders have already had their 2008 predictions proven wrong. Matthew Gardner: “For 2008, Gardner is predicting anywhere from zero appreciation to home prices falling as much as 5 percent.” Dick Conway: “Conway anticipates average Puget Sound-region home prices will decline less than 1 percent next year…”

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

(Home Price Indices, Standard & Poor’s, 07.29.2008)

As you may recall, a few months ago the NWMLS statistics for April showed a slight increase in prices (+2.0%) month-to-month. Well, the April Case-Shiller Home Price Index has been published, and surprisingly, they show an increase for April as well, but not nearly as much:

Up 0.7% March to April.
Down 4.9% YOY.

According to Case-Shiller, home prices in Seattle did get a slight spring bounce, and inched up slightly to “only” 6.6% below their July 2007 peak.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland and Seattle seem to be moving in virtual lock-step for the last few months. Portland also saw a month-to-month increase in April. Both Northwest cities are performing worse than San Diego or L.A. were at this point in their downturn. This is most likely due to the financial crunch, which had not yet gained full steam 17 months ago.

Click to enlarge

And here’s the graph of all twenty Case-Shiller-tracked cities:

Click to enlarge

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.

Click to enlarge

Again note that Portland and Seattle both had little bumps with the most recent data. However, even with the bump, Seattle has still declined more in the nine months since its peak than 10 out of the 11 other cities on the chart, including Portland. At this point in San Diego’s decline, prices were down only 1.2%, San Francisco was down 3.5%. Those cities have now seen a total decline of 28% and 25%, respectively.

Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Click to enlarge

With the apparent “spring bounce,” the price rewind stayed steady in April at approximately 21 months.

Still no bottom in sight down in California, which means the “it won’t get as bad here” talk still doesn’t really have a baseline to compare with. I highly doubt that March was the bottom for Seattle. You can see that a number of other cities have bounced up and down on their way down to 20%+ declines, and that is probably all that’s happening here.

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

(Home Price Indices, Standard & Poor’s, 06.24.2008)

The March Case-Shiller Home Price Index came in fairly close to, but slightly worse than the NWMLS statistics for the same month.

Down 0.9% February to March.
Down 4.4% YOY.

According to Case-Shiller, home prices in Seattle have now declined a total of 7.3% from their July 2007 peak, and have retreated to just above where they were in June 2006.

In related news, if you are looking for a laugh, check out this recent column over at Inman News: Put a gag on Chicken Little. In it, the author actually tries to argue with a straight face that Case-Shiller is the least accurate gauge of home prices. Her “logic” is centered on the fact that data from Case-Shiller shows larger price drops than indices from OFHEO (which includes refinancing and only conforming loans), the NAR (you know how trustworthy they have proven themselves to be), and Realogy (parent company of Century 21, ERA, Coldwell Banker, and Sotheby’s International Realty—definitely no bias there, either), so obviously Case-Shiller must be incorrect. Heh.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland’s YOY drops nearly caught up with Seattle in March, coming in just over 4% to Seattle’s 4.4%. The vertical axis on most of these graphs had to be expanded, due to the continued declines in cities such as San Diego and Miami, now topping 20% YOY, and 25% total decline from the peak (with still no sign of slowing).

Click to enlarge

And here’s the graph of all twenty Case-Shiller-tracked cities:

Click to enlarge

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.

Click to enlarge

8 months into home price declines, Seattle has shed 7.3% off the peak. At this point in San Diego’s decline, prices were down a whopping 0.5%, San Francisco was down about 3%. They have now seen a total decline of 26% and 23%, respectively.

Here’s the “rewind” chart I introduced last month. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Click to enlarge

Prices have been rewound approximately 21 months to June 2006. In the 8 months since Seattle’s peak prices, 13 months of price gains have been wiped out.

One thing I hear a lot is that price drops will never get as “bad” here as they will in Florida or California. I agree with that assertion. However, even if we take that as a given, we won’t really know anything about where Seattle’s bottom will be until we finally see a bottom in Florida and California. San Diego and Miami are down 26% so far, but who is to say they won’t continue dropping until they reach 50% off? They’re certainly not showing any sign of leveling off any time soon. If that were to happen, prices in Seattle could drop “only” 35-40% (which would put us at 2003 prices) and still not be as “bad” as Florida or California. A scenario like that seems entirely plausible to me.

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

(Home Price Indices, Standard & Poor’s, 05.27.2008)

Update: Here’s the Aubrey Cohen’s P-I story on the data. Apparently Elizabeth Rhodes at the Times is too busy today to do anything more than add a single sentence to the AP story.