Case-Shiller: Seattle Not Really Special

Much has been made of Seattle’s continued resilience in the face of the national downturn in housing prices. However, the bear comeback to this type of cheerleading is the argument that Seattle is simply late to the party and will eventually see declines of its own as well.

In order to test how well the “late to the party” hypothesis holds up, let’s do a little comparison shopping using the latest data from the S&P/Case-Shiller Home Price Index (March 2007).

Following is a graph of YOY appreciation for each of the cities tracked by the Case-Shiller index in which YOY appreciation reached at least 15%, with the peak appreciation for each city lined up at “Month 0”:

I have highlighted Seattle’s data with the thick green line. As you can see from this graph, Seattle is actually following right along the middle of the road since its peak YOY appreciation, when compared to other cities that experienced a similar real estate boom. Here’s a summary of how long each city took to go from maximum YOY to YOY negative:

City – months from cliff to negative YOY
Cities in italic have not gone YOY negative yet.
Portland, OR – 12 (6.98%)
Tampa, FL – 14
Los Angeles, CA – 14
Seattle, WA – 15 (10.02%)
Phoenix, AZ – 16
Miami, FL – 17 (1.05%)
Washington, DC – 18
San Francisco, CA – 19
New York, NY – 22
San Diego, CA – 25
Las Vegas, NV – 29
Average – 19.6

To review, Seattle:

  • Peaked at 18.5% YOY appreciation in December 2005.
  • Has since been consistently declining.
  • Is approximately 6-12 months away from where the Case-Shiller data suggests it will enter negative YOY territory.

FYI, “all real estate is local,” is not a valid retort to data that suggests a conclusion that makes you uncomfortable. If “all real estate is local” then why is it that since March of last year, every single city tracked by the Case-Shiller index has had steadily decreasing YOY appreciation?

In my opinion, the writing is on the wall.

For even more brainy number-crunching of the Case-Shiller data, check out Deejayoh’s analysis in the forum. Great work!

(MacroMarkets, S&P/Case-Shiller HPI, 05.2007)

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    biliruben says:

    Nice graph.

    The bump-up before the eventual fall in LA leads me to wonder about seasonality and it’s effect on rate at which YOY changes decrease. I can think of a way to display prime selling-season on the graph, or even if this is constant across cities, but it would be interesting if you could perhaps place a do-hicky or something where April is.

    In an unrelated matter, looking at your spreadsheet, there is already a number for total inventory in May. That number isn’t known yet, obviously. What’s the deal?

  2. 2
    The Tim says:

    Ah, yes. Sorry, I didn’t realize I uploaded a version with that in there. I use that as an ongoing estimate.

    I take the latest data from the Bubble Markets Inventory Tracking blog and take the percentage of that equal to how comparable it was last month. In this case, last month’s final count on the blog was 14,608, compared to NWMLS SFH inventory of 7,649 = 52%. 52% of May 20’s reading of 16,207 = 8,486.

    It’s really just meant to be for my own personal use, to satisfy my curiosity of how inventory is stacking up through the course of the month.

  3. 3
    Terry says:

    Nice work. I think everyone can now guess which direction Seattle real estate prices are headed.

    Also, it might be obvious to most, but it’s interesting to note that cities with the most severe appreciation are also the cities that have the most severe negative slope. These graphs lend credibility to those that have said that Seattle will not see the same depreciation as some other cities have experienced / will experience.

  4. 4
    Mike2 says:

    Since Meshugy hasn’t been around lately, I’ll chime in and say “all this proves is that Seattle is returning to a balanced market with 6% annual appreciation in the forseeable future.”

  5. 5
    housing-bull-dozer says:

    Wait a minute here. 6-12 months is when the Sonics are expected to announce that they are moving to Cuba where Fidel is building them a new ‘world class’ something or other to play in. We all know that once that is announced, that Seattle will loose at least 50k high paying jobs. I think Tim is just making up charts so he can look good when this goes down.

  6. 6
    deejayoh says:

    In an unrelated matter, looking at your spreadsheet, there is already a number for total inventory in May. That number isn’t known yet, obviously. What’s the deal?

    You can get a pretty accurate quote from the Windermere site using this link. KingCo SFRs are over 8600 as of today.

  7. 7
    david losh says:

    I also read the S&P report this morning that says Seattle is returning to a more normal rate of appreciation.
    Of course prices will go down as inventory increases. Inventory is increasing because people paid too much for junk.
    Where’s the mystery in all of that?
    Your bubble’s here, now what? Houses are still starting at $300K for junk. $400K is getting you polished poop. I looked at a disaster in Shoreline that is near the freeway for $349950 and agents were crawling all over it.
    Last year that house would have been $3999950 and some one would have bought it!
    The reality is that those who jumped on the Real Estate band wagon are going to pay the price but price is a function of time.
    Those who can’t hack it will be foreclosed upon and the bank will sell for a loss that they will write off against stagering profits.
    But wait, there’s more. Also in the report today:

    And while data released Tuesday gave no clear signs of an end to the housing slump, Thayer noted that he feels confident that consumers can “work through continued weakness in housing” as long as the employment situation remains healthy. Standard & Poor’s housing index on Tuesday showed that U.S. home prices fell 1.4 percent in the first quarter compared to a year ago, the first time since 1991 that prices have shown a quarterly decline.

    On Thursday, the Commerce Department reported that sales of new homes surged in April by the biggest amount in 14 years, but the median price of a new home fell by the largest amount on record. On Friday, The National Association of Realtors reported that sales of existing homes fell by a larger-than-expected amount in April, while the median price of a home sold fell for a ninth straight month.

    In the report you will see new home sales compared to exsisting home sales. For new home sales let’s take our own ticky tacky town houses in Seattle. They started at $250K then jumped to $350K and for some unknown reason people started paying $425K for the same pieces of crap they were getting for $350K. The price of granite was going down and the price of the units was going up. Labor prices were what made head lines but I think suckers paying too much was the story.
    Now the suckers are back to paying $350K and for some reason that’s seen as a bargain so sales are brisk.
    Exsisting homes are being left to the side lines while people rush for those new homes that have the big discounts. Exsisting homes prices must be falling at a more modest rate.
    The reality is that the price point of our ticky tacky town houses is still $250K. Land cost at $62500 plus construction at $136000 plus selling and holding at even $30K leaves the expected $20K margin of profit over eight units is $160K for six months work at $250K per unit. So how about that $350K price point that was selling for $425K last year? That’s a whole bunch of money for some body. Here’s the sad fact: those town houses are built on prime Real Estate dirt. If you times them by $120K for eight units that puts the value of the dirt at $960K. I can put twenty four housing units on that dirt today.
    So the value of that $350K housing unit is really only about $120K, OK let’s go all out and pretend it’s $250K . What are you guys going to do about that?

  8. 8
    Crashcadia says:

    consumers can “work through continued weakness in housing” as long as the employment situation remains healthy.

    When are you going to realize that the wave of recession that is just over the horizon will put an end to such talk of soft and fluffy landings.

    If you think foreclosures are bad now, just wait.

    Its a small wave until it gets pushed up on our shore.


  9. 9
    Lisa says:

    Part of the challenge of looking at the “rolling” nature of this bubble is that the local media insist on taking a myopic view. I’m in the Bay Area, and it’s rare our local press does any coverage of other markets. Who peaked first? Who tanked first? Who’s up next? It would be impossible to know from the local press. So, until price declines arrive at a neighborhood near you, folks just can’t believe it’s coming. But it will. Look at what’s happening in Florida now, it’s a bloodbath. RE may be “local” but most of the lenders are national. So as more markets turn ugly, standards will tighten for everyone, regardless of how “special” or “unique” a market is.

  10. 10
    wreckingbull says:

    “Your bubble’s here, now what?”

    Now I rent at 35 cents on the dollar until the P/E of real estate returns to reasonable levels. When that happens, it will make sense to buy. Won’t be this month, this year, or possibly even this decade.

    Just finished Kindleberger’s “Manias, Panics and Crashes”. I highly recommend it to anyone who thinks that we will just settle right back into a nice 6-8% year appreciation. Bubbles deflate. It’s what they do best.

  11. 11
    CCG says:

    ‘Thayer noted that he feels confident that consumers can “work through continued weakness in housing” as long as the employment situation remains healthy.’

    *yawn* game over, thanks for playing.

    “Half of New Jobs Are Real Estate Related”

    “The Contribution of Housing to Recent U.S. Employment Growth: 27% to 40%”

    I wonder why I bother anymore. Fighting ignorance is a hopelessly losing war. I’m convinced that if I set up a printing press on the corner and began printing dollars to buy bags of flaming dog crap, within a week we’d have morons the world over gibbering about how “they’re not making any more dog crap”, “dog crap only goes up”, and “buy some dog crap now or be priced out forever”.

  12. 12
    CCG says:

    I should add that my snark is directed at Thayer and shills and canards like him, not at the poster.

  13. 13
    Steve Tytler says:

    Your graph shows exactly what I have been saying … the housing markets with the highest appreciation in the boom always fall the fastest when the market goes bust.

    Seattle did not “boom” as much as other markets and it will not collapse as fast either. You will NOT see 30-50% home price deceases here. Sorry folks, it’s not going to happen.

    Home prices may drop 10-15% from from the peak of the housing market last year, but all that does it get us back to the home price level of about January 2006. The market will then flatten out to essentialy 0% appreciation for a few years, as I have been saying for the past couple of years.

    That’s my story and I’m sticking to it.

  14. 14
    deejayoh says:

    So the value of that $350K housing unit is really only about $120K, OK let’s go all out and pretend it’s $250K . What are you guys going to do about that?

    Did you have a point you wanted to make? It was lost on me in the third grade math lesson.

  15. 15
    deejayoh says:

    Seattle did not “boom” as much as other markets and it will not collapse as fast either. You will NOT see 30-50% home price deceases here. Sorry folks, it’s not going to happen.

    Steve – I don’t know that anyone is disagreeing with you on that one. But if you were going to put six figures down payment on a house late last year, I bet you’d think that 10-15% decline was important, no?

    Sure you could make up the loss if you held it thirty years – but you could also put the money in the market, rent for 45% the monthly nut, and come back and buy the next year for less – without getting into a crazy bidding war.

    Sounds pretty good to me.

  16. 16
    little says:

    The seattle market, like other dot.com markets along the West coast, began it’s RE ascent EARLIER than other markets (96/97) and then flattened out a bit before the the final 2001 rates lowering debacle.

    Homes that were 180K in ’96 blew up to nearly a million in ’06.

    This constant insistence in the local media that Seattle “hasn’t appreciated as much as other places” is pure BS. Like the Silicon Valley, we just started earlier. But we only count what has happened since after ’01.

  17. 17
    Inductivist says:

    I’m puzzled.

    Most of the discussions so far have focused on Seattle’s being “late to the party” in terms of unsustainable appreciation. One poster has stated that Seattle, in fact, started its run up earlier than other markets (a claim I haven’t heard before).

    In any event, I’m not clear on what underlying mechanism(s) allow Seattle to continue to appreciate–even if that appreciation will slow or stop soon–if macro factors (e.g., a general tightening in the mortgage credit markets) are what’s putting on the brakes elsewhere in the country.

    For the record: I’m not a bubble-denier (not even close!), not do I claim that Seattle is “special.” What I *am* is curious to understand what’s going on with area real estate, beyond the sound-bite level.

  18. 18
    david losh says:

    Housing prices are in the hands of the consumer. When we over pay for cars, food, gas, and clothing there is nothing to say that when we stop paying the higher price the product prices won’t come down.
    My business is to buy houses cheap and sell them for more money. I think my end product is a very good value but the Real Estate community ignores it in favor of selling slab granite and stainless steel appliances. In reality the have been plenty of very cheap houses on the market the last five years. If the house doesn’t “sparkle” it sits there.
    I like this site because it had or has a point. This particular post was interesting because it uses the S&P report which prove a wide variety of opinions. It just goes to show that the “data” isn’t absolute. What the majority pays for a product does not reflect value. When I pay two hundred thousand dollars less for a property in a “hot” market does that mean I paid under value? In my opinion I paid a fair price aside from mass hysteria about housing.

  19. 19
    Jeff says:

    “Seattle is actually following right along the middle of the road”

    If anything that graph supports the notion that seattle is not changing like the other cities. How many of the cities are above Seattle on the graph and how many below? By how much? I personally believe that Seattle prices are done appreciating right now….but this graph seems to be seen through anti-rose colored glasses.

  20. 20
    mydquin says:

    Two major logical problems underlying this graph.

    1) Graphs are built on numbers. However, without understanding the qualitative factors driving those numbers, the graph is largely meaningless. We’re probably going around in circles for the Nth time here, but many of the comparison cities in this graph are influenced by fundamentally different sets of economic (i.e. the PROFESSIONAL labor market) and geographic factors (i.e. water barriers, scenic views).

    2) On a related note, differentially re-setting the peak of each city’s trend line graph to time 0 is a statistical slight of hand with no basis in theory. I keep hearing people here talk about how the Seattle market lags the rest of the nation, but I have yet to hear a reasonable explanation for why that is so.

    I suppose you could claim that Seattle strong local economy and it’s unique geographic features delayed the onset of the downturn. However, if you are going to make that claim, then you basically need to quit acting like Seattle is NOT different from those other cities. Moreover, you also need to seriously consider the possibility that while Seattle has experienced the same nation-wide influences (e.g., changes in national interest rates, bank lending practices), the negative impact of each of those national forces just happens to be less severe due to positive local forces.

    Bottom line: technical analyses, like this graph, are pretty weak and possibly misleading without stronger theoretical justification.

  21. 21
    rafsan says:

    Since A) YOY changes are retrospective (for 1 year, by definition) and B) the trendline for Seattle suggests that YOY appreciation will go into negative territory in about a year, doesn’t it mean that we’ve just now reached the point at which purchasing a home in Seattle would put you underwater (in addition to transaction-related costs)?

  22. 22

    […] Seattle may just be “behind the cycle”? Now where have I heard that before? Oh yeah, right here. Over and […]

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