Case-Shiller: Welcome to Depreciation, Seattle

Home prices in Seattle continue to decline, at an increasing rate, according to the latest data from the Case-Shiller Home Price Index.

Down 1.76% December to January.
Down 1.25% YOY.

In a big surprise to absolutely no one, Seattle is now officially in the realm of year-to-year price declines. What a change from just one year ago, when prices were up 11.14% year-over-year. It only took six months of declines from the peak to get here. Home prices in Seattle have now declined a total of 5.55% from their July 2007 peak.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Despite a sharp drop down in Portland, Seattle’s YOY is still slightly worse than our neighbors to the south.

Also, here’s an interesting coincidence: The total time from peak year-over-year appreciation to year-over-year depreciation in Seattle came in at 25 months. Most cities went negative quicker than that (Detroit was the fastest at 11 months), but two cities took longer, Minneapolis and Las Vegas. One city took exactly as long as Seattle. I bet you can guess which one… San Diego. Heh.

Case-Shiller HPI: West Coast
Click to enlarge

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

Case-Shiller HPI: All Cities
Click to enlarge

Here’s an update to the peak-decline graph I posted last month, 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 total months since each individual city peaked.

Case-Shiller HPI: Decline From Peak
Click to enlarge

I don’t think anyone would have guessed that for the first six months on the way down, the city we would follow the closest would be Miami. Yow. But don’t anybody worry, I’m sure the bottom is in. Just like it has been for each of the last twelve consecutive months.

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

(Home Price Indices, Standard & Poor’s, 03.25.2008)

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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.

87 comments:

  1. 1
    b says:

    Seattle prices are back to August 2006 levels, according to Case-Shiller.

  2. 2
    vboring says:

    i wish these numbers were reported in real terms – inflation adjusted.

    relative to gold would be interesting, too. and easier to figure than adjusting for inflation, since there is pretty much just one way to price gold. whereas inflation is a politically enhanced number.

    adjusted for inflation, seattle home depreciation from peak is approaching 10%.

  3. 3
    vboring says:

    then again, compared to the dow jones since july, you would have only lost 5.88% on a housing investment versus -8% in the dow jones.

    not that they are comparable, really. one is a residence. the other is an investment.

  4. 4
    MrRational says:

    I have to say I’m quite surprised how close we are tracking Miami on the way down. Thanks for the great work Tim!

  5. 5
    b says:

    vboring –

    Considering a house cost you 6% commission (opposed to $10), and it is leveraged at least 4:1, you would have lost a whole lot more.

  6. 6

    Any reasons why the duration of decline will be the same as San Diego, etc? Or won’t?
    I understand that all of these cities are declining and may for some time in the future, but not all of these cities will be declining for the same length of time total…My guess is that since Seattle was late to the party we will indeed be late leaving the party, but what do I know? ( Don’t answer that!)..
    I also find Boston pretty fascinating, how it had a short lived rise and then couldn’t sustain it.

  7. 7
    Soda says:

    That “Total Decline From Peak” graph looks just like a screen shot from Missile Command. Watch out for those nukes!

  8. 8
    vboring says:

    b-

    i can leverage investments in the stock market too. just like i could theoretically buy a house with cash.

    and i could choose to use a 6% realtor or not to. just like i could choose to use an expensive investment manager if i wanted to.

    the primary point, though, is that houses are best seen as places to live, not as investments. i think that is the primary message that even the NAR will be pushing before this is over:

    invest in your life, not your house. buy a place because you want to live there, not because of which direction its price might go in the future.

  9. 9
    Joel says:

    then again, compared to the dow jones since july, you would have only lost 5.88% on a housing investment versus -8% in the dow jones.

    Don’t forget the magic of leverage. If you had put 20% down you have now lost 29.4% of your money and that’s not even factoring in transaction costs. It’s a good thing that a home isn’t an investment.

    Oh, wait…

  10. 10
    Affluent Bitter Renter says:

    “i can leverage investments in the stock market too. just like i could theoretically buy a house with cash.”

    Yeah, there are a lot of ways to risk financial suicide – the difference is that the default in the stock market is that you aren’t leveraged, and the default in the real estate market is that you are very leveraged.

  11. 11
    TheHulk says:

    Reminds me so much of a roller coaster ride.

    Everybody loves to see them from the ground (the renters). They have all seen how high the people on the ride go and oh boy are they anxious to get on. The sleazy carnies (realtors/mortgage brokers/wall street firms) are standing by to help you. Its going to be fine! you are going to love it! You only have to be “yay tall” to ride. As more people get on the tallness requirement is lowered, or the carnies look the other way as shorter people get on. (Of course they get you to sign the disclaimer :warning this ride may cause diziness, shortness of breath, cardiac arrest etc)

    Finally after a long wait you decide to get on the ride. You feel fine and then you see it coming. You know it when you are approaching the highest point.

    Initially the climb rate is fast because of previous momentum (2004-2006). And then it starts slowing down and you know you are approaching a high (2006-2007), you don’t really want it to end you want to keep going higher, but you are out of gas (sub prime mess). And now you are on the top yay!! (mid year 2007).

    Uh oh, now there is only one way to go and thats down. You feel a little fear, some butterflies in your stomach. The people who started at the bottom (2000) are fine and having fun. Those who picked extra baggage along the way (home equity loans) are a little more scared. Those who got on the ride halfway to the top, well lets just say they haven’t had time to fasten their seatbelts. And would you look at that, all the carnies have disappeared. They are all outside the park urging more people to get in. Except that people have read that the ride is unsafe and dont want to go in anymore.

    Enjoy the ride while it lasts folks! Remember just like on a roller coaster it always takes less time to go down than it takes to go up.

  12. 12
    softwarengineer says:

    DR. DOOM (ROUBINI) PREDICTS A GREAT DEPRESSION?

    See Dr. Doom argue with the con game banker on CNBC, its hilarious….

    http://www.cnbc.com/id/15840232?video=695465861

  13. 13
    Peckhammer says:

    “then again, compared to the dow jones since july, you would have only lost 5.88% on a housing investment versus -8% in the dow jones.”

    Sure. That’s some incomplete math, me thinks.

    I don’t pay mortgage interest, taxes, insurance and maintenance costs for my stock portfolio. Yes, there are some expenses, but far less than I’d pay for a housing investment.

  14. 14
    SeattleMoose says:

    So much for being “special”…..late, yes…but special? Nope.

  15. 15
    Scotsman says:

    Thanks for the great work, Tim!

    It looks like Seattle is working hard at catching up with the rest of the U.S. It will be interesting to see if the lag needed to fit the curves drops from 17 months to something less as this continues to progress. My guess is it will.

    It is amusing, or perhaps criminal, how everyone continues to call a bottom. But wishing doesn’t make it so. We’ll be at the bottom when median price is three times the median income with 10-20% down and an average credit score. At that point prices will be sustainable, assuming the rest of the economy has stabilized too, and the government hasn’t completely distorted everything with its heavy hand.

  16. 16
    S-Crow says:

    Vboring states: “invest in your life, not your house. buy a place because you want to live there, not because of which direction its price might go in the future.”

    I understand what you are saying, but if that were the case, then wouldn’t people just go back to buying? So much of people’s net worth is tied to housing that it is probably never going to get to the realm of “it’s just a place to live,” although it is a good start.

  17. 17
    Interloper says:

    Tim, I hope you feel vindicated. I do a little bit for seeing the Emperor had No Clothes.

    You perform a valuable service to the community by providing a sane counterpoint to the housing “bulls” — not to mention more data than *anyone* locally. If more people listen(ed) to you, they can save a lot of heartache from bad real estate decisions.

    Prediction: the worst is ahead. The average Seattle-ite until now has only realized that prices have “stopped increasing” and have no idea they’re decreasing fast (because the news mainly reports annual data). They *are* decreasing fast and would seem they have to decline another 5% before momentum could reverse even in the *best* case. I think it’s gonna be a bumpy ride.

  18. 18
    vboring says:

    S-crow,

    as i’m sure you know, people are still buying. a lot less people than last year, but still more than zero.

    all i’m claiming is that the new sales mantra from the NAR will try to help people get over economic fears (very reasonable economic fears, in my opinion) and instead focus on lifestyle advantages. i’m sure some individual realtors are already doing this. i think it is just a matter of time before it becomes the NAR’s official line.

  19. 19
    vboring says:

    inflation adjusted C-S chart for a few cities, if anyone is interested:

    http://calculatedrisk.blogspot.com/2008/03/real-case-shiller-house-price-index.html

  20. 20
    Buceri says:

    Scotsman said:

    “We’ll be at the bottom when median price is three times the median income with 10-20% down and an average credit score.”

    Assuming $60K mediam household income, that puts the mediam house in the Puget Sound area at about $180K.

    Is this where you see it hitting the plateau??

  21. 21
    rose-colored-coolaid says:

    #19, actually it puts the price around $225,000 ($225,000 * 0.8 = $180,000)

  22. 22
    patient says:

    b’s comment #1 makes for a suggestion to a new c/s chart. One with the index plotted since say 2004 where a horizontal line is drawn at the latest c/s level so we can see what earlier date it corresponds to. This date can also be in text.
    I.e for this months c/s report the horizontal line would cross August 06 and Jan 08. As time progresses the line will probably cross further and further back in time representing how far back we need to go to match the latest valuation.

  23. 23
    alex says:

    I find it really unlikely that our bottom median (the way it is measured today) ever gets down to $225,000 again. Reason being that the people who move the market the most (i.e. people who buy the most houses-per-year) are people with incomes much higher than the average.

    So you’ll see a small number of mansions being bought and sold, while there’s near-zero (and dwindling) activity in the low-end sectors. And that’ll keep the median price up.

  24. 24
    vboring says:

    median price implied by C-S is not the same thing as median sale price because C-S tracks the sale prices of same houses, whereas median sale price is just the median price of houses sold during a given period.

    NAR median sale price is influenced by the mix of houses sold. C-S is not.

    i agree that $225k nominal median sale is a unlikely for the area, but we could see $225k median value (according to C-S) adjusted for inflation, depending on what measure of inflation you use and how stupid our government interventions get.

    that’d mean a C-S value of 100 + inflation, since the C-S started at 100 in 2000 for seattle, right?

  25. 25
    Buceri says:

    RCC – so mediam houselhold income is $75K??

  26. 26
    Joel says:

    RCC – so mediam houselhold income is $75K??

    No, your calculation assumed 0 downpayment. RCC assumed a 20% downpayment making the loan 3x median income.

  27. 27
    rose-colored-coolaid says:

    In response to #24, What Joel (#25) said.

  28. 28
    Ubersalad says:

    I second what #27 said in response to #24.

  29. 29
    Shawn says:

    Okay, time for the press to line up and start saying they were wrong, and so very sorry. I have a great line for Seattle RE “we are experiencing a temporal anomaly.”

  30. 30
    Sorin says:

    To Shawn’s lines for RE:
    “We are currently experiencing an interval of inexplicably sensible behavior. Remain calm. Irrational Exuberance should be returning shortly.”

  31. 31
    magnolia44 says:

    ****crickets**** ***crickets******

    lol

    I can have a laugh… in line with my 10 – 15% projection..nothing to see here move along..

  32. 32
    David McManus says:

    Don’t worry, Minute over Minute appreciation of Seattle homes is 0.00003%!!!

  33. 33
    nishvm says:

    hey hey Tim, just saw you on King5 news .. in the crew cut look.
    have a beer for being a local celebrity :)

  34. 34
    John says:

    This kind of news should get people who are on the fence to put their homes on the market.

    SFH inventory spiked today. 10700+.

  35. 35
    george says:

    So who wins the prediction contest for YOY price declines in Seattle?

    I think my guess was for Feb.

  36. 36
    Alan says:

    Is that annualized, David?

  37. 37
    WaitingForSanity says:

    As Case Shiller passes important milestones on its journey back to rational prices we need to celebrate. We’re now at 5% off peak. When Seattle C-S gets to 10% off peak we should go out for a beer. (At the current rate, this will be in June.)

  38. 38
    Scotsman says:

    Hah! Remember, the above data is for January. Check that increasing slope again- I’ll bet we’re already down 10%, but won’t have confirmation until May. Who knows where we’ll be by then if the economy really crashes.

  39. 39
    Scotsman says:

    I am curious to see if an increasing awareness of the fact that the market and prices are both finally heading south will prompt people to list, or if they’ll pull out? Obviously those who need to sell will still be trying, but what will the rest do? What about those facing payment adjustments- will they tough it out or walk? Will the more investment oriented try to sell and hold on to some gains, or wait and hope? Time will tell.

  40. 40
    Buceri says:

    # 26, 27, 28

    “We’ll be at the bottom when median price is three times the median income with 10-20% down and an average credit score”.

    I am sorry, I can’t let it go. He did not say “the loan/mortgage is 3 times the mediam income; he said “the home price” is 3 times.

    So again, this puts the mediam home at about $180K.

    Yeah, I can’t let it go, because I want it to be a fact (and not a prediction!!!)

  41. 41
    David McManus says:

    Are we now at the point when anyone says “Real estate always goes up”, they are labeled as ignorant, delusional, or both?

    http://seattletimes.nwsource.com/html/businesstechnology/2004306599_homeprices26.html

    Did you guys see that Portland is more special than Seattle?

  42. 42
    notabull says:

    “Hah! Remember, the above data is for January. Check that increasing slope again- I’ll bet we’re already down 10%, but won’t have confirmation until May. Who knows where we’ll be by then if the economy really crashes.”

    The data is a 3 month moving average for Nov/Dec/Jan. So I *think* that means that if you want to know what happened in, say, Feb then you have to get the data for March, as that would be the average for Jan/Feb/Mar and thus putting Feb right in the middle. That’s how I think about it anyway – could be wrong.

    Buceri, it’s MEDIAN, not mediam or indeed medium. Mediam is not a word, and medium is the incorrect usage in this case anyway. The “median” refers to “in the middle” or “mid-point” and in statistics refers to half the data on one side, and half on the other.

    While we’re at it, and this doesn’t refer to you but I’m going to say it anyway, it’s “tract” housing not “track” housing.

    Also, there is a difference between ensure, insure and assure. The ONLY correct usage of “insure” is with reference to a guarantee against loss or harm with relation to the issuance of an insurance policy. It drives me nuts to see marketing people with English degrees saying things like “to insure satisfactory performance of the product, you must blah blah”. Oh, really? How much is the policy? I’d love to insure that. Can I pay by installments? BAH HUMBUG!!!

  43. 43
    David McManus says:

    #41: Don’t forget affect / effect, they’re / their / there, and two / too / to.

    I wish these people would get there English together to!

  44. 44
    notabull says:

    “I wish these people would get there English together to!”

    Its a terrible problem. :)

  45. 45
    olaf says:

    And don’t forget “tack” vs. “tact.” As in, “I’m taking a new tact.” Ugh. Linguistically tactless.

    Now that KING 5 has abruptly switched to the gloom and doom tone (there really is no middle ground for them, is there?), I think we’re going to hear the approaching thunder of the herd mentality shifting in our direction. That is, the herd running for the exits on their overpriced shacks. Those “New Price!” signs are going to become as commonplace as mossy shingles in this market.

    So THANK YOU to all the fellow Bubbleheads who recently counseled me to be strong and resist the temptation to buy. We just signed a new 12-month lease. It’s going to be a lot more fun to watch the mayhem from the deck chairs on the front porch of our rental.

  46. 46
    Garth says:

    Case shiller is a 3 month moving average, and tracks King, Pierce and Snohomish county. It is really an average of puget sound housing prices from tacoma to marysville, hence the median being lower than that in king county alone.

    The title says Welcome to Depreciation, Seattle, but the reality from the most recent MLS numbers it appears the bulk of the price drops were in Snohomish and Pierce counties.

  47. 47
    deejayoh says:

    The title says Welcome to Depreciation, Seattle, but the reality from the most recent MLS numbers it appears the bulk of the price drops were in Snohomish and Pierce counties.

    Garth – see Tim’s next post. are you suggesting that the “high priced” tier is predominantly located in Snohomish and Pierce counties? The downtrend appears to be pretty universal to me.

    I think that there is probably a more even distribution of home prices in outlying areas (e.g. lots of cookie cutter subdivisions and relatively few McMansions) than there is in King County. What this would mean is that the drop shows up more clearly in the median price for these areas than it would in areas with a broader range of prices (like King County). The mix of homes sold simply cannot change as much.

    However, given that prices for every tier of homes appear to be falling – I personally find it difficult to conclude this is just an issue in outlying areas

  48. 48
    patient says:

    “it appears the bulk of the price drops were in Snohomish and Pierce counties.”

    Gath that rimes pretty poor with the fact that the high tier took a bath this time around.

  49. 49
    Garth says:

    So far it is an issue of locations where there has been new development.

    This is from tim’s January NWLMS Post

    King – Price: +1.3% | Listings: +55.6% | Sales: -30.6% | MOS: 7.5
    Snohomish – Price: -1.5% | Listings: +41.9% | Sales: -36.8% | MOS: 8.8
    Pierce – Price: -2.2% | Listings: +26.3% | Sales: -36.6% | MOS: 11.3
    Kitsap – Price: -0.5% | Listings: +32.9% | Sales: -8.9% | MOS: 9.8
    Thurston – Price: +3.7% | Listings: +11.2% | Sales: -23.7% | MOS: 7.0
    Skagit – Price: -4.1% | Listings: +17.6% | Sales: -23.4% | MOS: 9.5

    and here is february

    King – Price: -0.0% | Listings: +61.3% | Sales: -32.3% | MOS: 6.1
    Snohomish – Price: -0.3% | Listings: +44.5% | Sales: -36.3% | MOS: 7.4
    Pierce – Price: -7.4% | Listings: +26.0% | Sales: -28.2% | MOS: 8.6
    Kitsap – Price: -12.3% | Listings: +35.5% | Sales: -35.2% | MOS: 9.7
    Thurston – Price: +2.0% | Listings: +14.8% | Sales: -17.7% | MOS: 6.0
    Skagit – Price: +9.2% | Listings: +23.2% | Sales: -20.6% | MOS: 8.4

    Where are the King county price reductions in those numbers? I see pierce and snohomish down the last 2 months and King county up 1.3%. What data is leading you guys to believe it is king county bringing down the numbers?

  50. 50
    deejayoh says:

    What data is leading you guys to believe it is king county bringing down the numbers?

    I didn’t say it was king county bringing down the numbers. what I said was that I would not draw any conclusions using the median as an indicator of what is happening – especially when there are mix-shifts going on driven by financing availability. King county is far less homogenous than pierce and snoho – so looking at averages and medians is far less values.

    But if you accept that King county is the site for the bulk of the “high priced” homes (over $455k) then the inference seems pretty clear.

    I

  51. 51
    deejayoh says:

    oops. “values” should have been “Valuable”

    And I don’t get the comment “So far it is an issue of locations where there has been new development.”

    Case Shiller is paired sales of existing homes only. New homes are excluded.

  52. 52
    Alan says:

    I am curious to see if an increasing awareness of the fact that the market and prices are both finally heading south will prompt people to list, or if they’ll pull out?

    Annual carrying costs on a $500k house (circa June 2007) with a $400k mortgage: $30k
    Loss from a 20% drop: 100k.

    If the owner believes prices will recover in three years then he can eat the carrying costs and still break even compared to selling today. If prices recover before that then he makes more money. I bet many investors are expecting prices to recover before then.

  53. 53
    patient says:

    “If prices recover before that then he makes more money. I bet many investors are expecting prices to recover before then.”

    perhaps but many investors are also savvy enough to know that when a price bubble of historical measures deflates it does not just bounce back to earlier levels after bottoming out. It’s a very long process and the risk to the committed capital and the time it’s being unproductive by being under water is not appealing. It’s likely “hobby” investors with to much pride and denial that will be skinned by hanging on to unrealistic hopes.

  54. 54
    Alan says:

    I assert that savvy investors are already out of the market (or are in properties that are going to gain 20% instead of lose 20%). The vast majority of investors still holding depreciating properties invest using emotion and herd mentality. They are exactly the type of investor who lets loss aversion dominate their thinking and they will be damned if they are going to sell their investment at a 20% loss. They would rather punish buyers trying to lowball them by continuing to pay their incremental holding costs. They are going to sell until their barber and waitress are telling them how bad real estate is an investment. That is when we will see the bottom of this market.

    There may be a bit of hyperbole and unjustified generalizations in the preceding paragraph.

  55. 55
    patient says:

    “I assert that savvy investors are already out of the market (or are in properties that are going to gain 20% instead of lose 20%). The vast majority of investors still holding depreciating properties invest using emotion and herd mentality.”

    I don’t know about that. Seattle has just depreciated for a couple of months and it takes some time to unload property even if you detected the top so there could still be many pros holding property.

    I get that you were sarcastic but just to be clear, they don’t punish any buyers buy holding out. They most probably save them a good amount of cash as long as prices are falling but they definately punish themselves.

  56. 56
    b says:

    Alan –

    I agree with you on that one. However I think what you see in many other states (coming soon to WA) is that these “investors” just walk away from the underwater property and never realize a loss. So I think its more likely that instead of capitulation by finally selling, they capitulate by getting foreclosed and the bank then sells for a loss. This type of activity should really accelerate the deprecation considerably more like it has in California, Florida and other states already.

  57. 57
    Alan says:

    They can only walk away from the loss if it is their primary residence. Real investors who purchase extra properties that they don’t live in will be on the hook for their loss.

  58. 58
    Alan says:

    they don’t punish any buyers buy holding out

    The intent wasn’t really sarcasm. I think that is the attitude of many people who are trying to sell. You see it in the occassional message from a seller urging other sellers not to lower their prices and that the price drops are just a result of negative media and other owners believing it.

  59. 59
    b says:

    Alan –

    Only if the lender decides to go after it, which is unlikely. As we have seen pretty much everywhere, lenders seem to have decided that it is cheaper to just take/auction the house than pursue the person for a deficiency judgement. A cushion of equity for non-primary loans used to be the main way of keeping this from occurring, and we all know where those type of standards went the last four years or so.

  60. 60
    The Tim says:

    b,

    A cushion of equity for non-primary loans used to be the main way of keeping this from occurring, and we all know where those type of standards went the last four years or so.

    Two words: Casey Serin.

  61. 61
    Garth says:

    deejayoh,

    So far every market with substantial price declines that is not in the rust belt has been where there has been lots of new development and investors buying properties in those new developments.

    Case-Shiller avoids building in builder’s promotions and such into their index by only tracking sales of existing homes only, but the effect of those new homes (and potentially nearby foreclosures) on the prices of nearby homes is in their index.

    I read in the WSJ yesterday that in San Diego and Las Vegas for the last couple of months > 40% of the total real estate sales have been foreclosures. Do you see that happening here in ~ 8-12 months?

    As a side note, Shiller was featured in today’s journal talking about the S&P being at 1999 levels today by some measures, and 20% off of it’s peak, signaling a bear market.

  62. 62
    Alan says:

    lenders seem to have decided that it is cheaper to just take/auction the house than pursue the person for a deficiency judgement

    You know that is not an either/or decision. The lender can take/auction the house AND pursue the person for a deficiency. If it is an investor with multiple properties, they can attach a lien to any property that has equity. Then the investor cannot sell that property until the lien is paid off.

  63. 63
    Ubersalad says:

    which reminds me of how reliable title companies are…and their so-called title coverage.

  64. 64
    deejayoh says:

    Sorry Garth. you lost me. first it was the median. then new home sales. now foreclosures. I don’t get it.

  65. 65
    economist says:

    I don’t pay mortgage interest, taxes, insurance and maintenance costs for my stock portfolio. Yes, tyere are some expenses, but far less than I’d pay for a housing investment.

    First of all, interest costs have nothing to do with the return on any investment. Borrowing money is just a way some people use to get money to invest. Person A might borrow money to buy MSFT, Person B might not, but all MSFT shares give the same return.

    Second, your return on any investment consists of capital gains PLUS net yield, aka total return. Yield on stocks is dividends. Yield on housing is net rental income – market rent minus taxes, insurance, maintenance, etc.

    Historically total return for stocks has been much better than for housing.

  66. 66
    Garth says:

    deejayoh,

    Every one of the places in the country where prices have dropped enough already to qualify as a downturn (10%) or a bubble (20%) there has been lots of new development and a subsequent substantial increase in foreclosures amongst homeowners in those new developments.

    Case shiller excludes new houses and foreclosures, but the Case-Shiller median prices for existing detached houses are clearly affected by being nearby these new developments. The local areas showing declines also happen to be where there has been lots of new development concentrating distresses homeowners.

    S-crow’s recent post also illustrates this as do most recent news reports:

    http://www.latimes.com/news/nationworld/washingtondc/la-me-ochomes26mar26,1,5327201.story

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/25/MNMUVPO1F.DTL

    I can’t find anywhere in Seattle zip codes where these conditions exist . The closest thing seems to be streets where 1/2 of the block became town homes, or houses flipped by builders and contractors which don’t seem real concentrated.

    I have read a statistic a number of times that every foreclosure within a mile of a house depresses it’s price by an average of 1.4%, put a lot of foreclosures in a concentrated area and prices can quickly drop 10-30% as homeowners in trouble affect each other.

    I have been looking and I can’t find those conditions concentrated anywhere in Seattle.

  67. 67
    b says:

    Garth –

    The new developments in trouble in the rest of the country are on the very far away outskirts of cities. For example, Stockton CA is the foreclosure capital and had a ton of new development. It is about 1.5 hours away from the Bay Area, but was considered by stupid investors as a upcoming exurb that people would not mind commuting to/from silicon valley. Depressing prices on those homes is forcing its way inward to the better areas. You will not find block after block of foreclosures in San Jose, but you can bet that the foreclosures in the outlying communities like Stockton, etc, is effecting the home prices here. The same is true in Seattle, large numbers of foreclosures are going to happen in the far away and over developed areas of King/Snohomish county, not in downtown Seattle.

  68. 68
    Marc says:

    Alan said:

    “You know that is not an either/or decision. The lender can take/auction the house AND pursue the person for a deficiency. If it is an investor with multiple properties, they can attach a lien to any property that has equity. Then the investor cannot sell that property until the lien is paid off.”
    I can’t say I agree with this statement. Lender’s who choose to foreclose “non-judicially” are barred from seeking a deficiency judgment against a borrower. This occurs in the vast majority of foreclosures because the lenders want to speedily liquidate the property. Non-judicial foreclosures are permitted only by the use of a deed of trust for security rather than a mortgage. Generally, speaking, executing against the property and proceeding against the borrower for a deficiency requires a “judicial” foreclosure or a lawsuit based on breach of the promissory note, either of which requires lengthy court proceedings. Since time = money, most lenders of residential real estate forego the judicial option in favor of the relatively quick non-judicial procedure and write off the deficiency.

    Secondly, a lender may not, as a simple matter of course, attach a lien to any property owned by the borrower. The lender must have a legal basis to record a lien on a property or else they are at risk of liability for slander of title. A final judgment against a person that is properly recorded in a given county’s auditor’s records will constitute a lien on any real property owned by the judgment debtor in that county, but again, that requires a completed lawsuit which is a time consuming process.

  69. 69
    Alan says:

    Marc,

    I am sure the laws differ from state to state. My brother sold a piece of land in AZ and seller financed it. The buyers tried to give it back to him even-steven when the value dropped by half. He told them no. They defaulted. He foreclosed, bought it back at auction for less than half what he sold it for and was able to get a judgement for the difference. When the judgement was filed it got attached to a different property they owned and they had to pay him before they could sell that property.

    Granted, if the defaultee doesn’t have any assets it isn’t worth pursuing and many defaults may be non-recourse.

  70. 70
    Alan says:

    From http://legal-dictionary.thefreedictionary.com/foreclosure:

    There is also judicial foreclosure in which the lender can bring suit for foreclosure against the defaulting borrower for the delinquency and force a sale. This is used in several states with the mortgage system or in deed of trust states when it appears that the amount due is greater than the equity value of the real property, and the lender wishes to get a deficiency judgment for the amount still due after sale. This is not necessary in those states which give deficiency judgments without filing a lawsuit when the foreclosure is upon the mortgage or deed of trust.

    How does the process of filing a Notice of Trustee Sale and selling at auction related to judicial/non-judicial foreclosures in WA state?

  71. 71
    Alan says:

    From: http://www.foreclosure.com/statelaw_WA.html

    If thedeed of trust does not contain thepower of sale language, the lender must seekjudicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

    Oh! There is another record type for foreclosure counts. You learn something new every day.

  72. 72
    Alan says:

    There have been 135 alis pendens filed in KC in 2008.
    There have been 1274 Notice of Trustee Sales filed in KC in 2008.

  73. 73
    Alan says:

    Again from:

    <Is there a right of redemption in Washington?
    Washington has a no post-salestatutory right of redemption fornon-judicial foreclosures. For judicial foreclosures, there is a one-year right of redemption and a residential owner may remain in possession of the property during theredemption period.

    It sounds like the right of redemption period is the amount of time after public sale that the foreclosee can reclaim his property by paying all deficiencies. Is this correct that for judicial foreclosures this is a year after public sale? What does “residential owner” mean? Is this saying that the foreclosee of a primary residence gets to live in his house for one year after public sale in a judicial foreclosure? No wonder more 90% of lenders pursue non-judicial foreclosures.

  74. 74
    Marc says:

    Alan,

    From your postings I can tell you’re seeing the complexities surrounding foreclosures in general not to mention the variability from state to state. In short, a judicial foreclosure is a full on lawsuit brought by the lender against the borrower in order to force the liquidation of the property and to obtain a judgment against the borrower for any deficiency. There are both statutory and equitable doctrines of redemption that come into play which increase the time and difficulty of selling the property free and clear to a third party bidder. Thus, most lenders prefer deeds of trust which allow them to foreclose without going to court (thus the term “non-judicial”). The trade off is quicker liquidation in exchange for foregoing the right to recover a deficiency from the borrower.

    I can’t speak to what your brother did in Arizona but it appears to have worked so that’s what counts.

    Note also that a Notice of Lis Pendens is quite different from a Notice of Trustee’s sale, the former being a notice to the world at large that the property identified in the notice is the subject of or may be affected by pending litigation, thus, anyone acquiring an interest after the date of the notice is at risk of their interest being adversely affected by the outcome of the litigation.

  75. 75
    Marc says:

    Note also that I’m not offering legal advice and no one should construe my postings on this blog as legal advice or the commencement of legal representation. If you or anyone else here needs or thinks they might need help with foreclosure issues I highly recommend contacting an attorney to assist you in that process as soon as possible.

    As Lt. Kaffey said to Col. Jessep, “the witness has rights.”

  76. 76
    Alan says:

    Again from foreclosure.com… Notice the difference in judgement summaries between FL, AZ, NV and WA. WA seems particularly hostile to the lender. I would bet that lender-friendly foreclosure laws result in faster dropping prices. Maybe WA really is special.

    FL
    Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount of the original loan.

    AZ
    Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. Lenders are prohibited by statute (33-729) from obtaining deficiency judgments in foreclosures where the land size is 2.5 acres or less and where the property was used as either a single one-family or single two-family dwelling. Deficiency actions must be brought within 90 days of a power of sale foreclosure. Any judgment is limited to the difference of the balanced owed and the fair market value of the property.

    NV
    Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. Deficiency actions must be brought within 90 days of a foreclosure sale.

    WA
    Generally, adeficiency judgment may be not obtained using thenon-judicial foreclosure process when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage or deed of trust secures. A deficiency judgment can be obtained injudicial foreclosure sale, unless the property had been abandoned for the preceding six (6) months prior to the foreclosure judgment or decree that would preclude any deficiency.

  77. 77
    Alan says:

    CA seems to be able to support perpetually high prices (based on the history of SF and LA). Their laws are similar to ours.

    CA
    Only in certain circumstances. Adeficiency judgment may not be obtained when a property in foreclosure is sold through a non-judicial public sale or if the foreclosure relates to apurchase money mortgage. Different rules apply to guarantors of such loans.

  78. 78
    b says:

    Alan –

    The problem is that Seattle is nothing compared to either SF or LA, both of which are “world class” cities with far more people, density and jobs in their vicinity. I remember looking up a while back for a post that prices in SF were actually cheaper than downtown Seattle if you took population density into account.

  79. 79
    patient says:

    From what I hear in the news it seems like the C/S report was quite a wake up call for many average people out there that is not reading SB or are actively in the market. There was a lot of talk of spoked listeners/viewers on the radio.
    The median is a noisy and tricky measure but I assume it likely that last years Feb – March increase of 5.8% up to $454,950 will be a tall order to match. I wonder how the recently spoked will feel if a ~5% median price decline is reported about a week from now. Kind of a left-right combination in boxing terms.

  80. 80
    bitterowner says:

    “Note also that I’m not offering legal advice and no one should construe my postings on this blog as legal advice or the commencement of legal representation. If you or anyone else here needs or thinks they might need help with foreclosure issues I highly recommend contacting an attorney to assist you in that process as soon as possible.”

    Off topic rant:
    This post, or more accurately the fact that it was considered necessary, represents much of what is wrong with our society.

  81. 81
    Marc says:

    BitterO,

    If your comment is meant to deride our over-litigous society, then have at it with my blessing. If it was aimed at me, well, have at that too. It simply seemed to me that Alan’s questions sought answers that, if given, could easily be construed as legal advice. Since I’m an attorney, if I give legal advice it could be construed as creating an attorney-client relationship thereby giving rise to the rights and obligations incident thereto. I do not wish to create such a relationship, thus the disclaimer.

  82. 82
    bitterowner says:

    Marc,
    Society, not you.
    I thought it was clear.

  83. 83
    Alan says:

    I understood Marc’s comment about legal advice. In my opinion, it is a good thing that we require a license for practicing law. It is also a good thing that those with a license can be held accountable for give bad interpretations of the law. It is also a good thing that people with a license can talk about the law outside of rights and responsibilites their license confers.

  84. 84
    bitterowner says:

    Alan – agree completely.
    It is, however, a bad thing that someone with a law degree cannot provide opinions – even opinions arrived at through professional training and practice – with the legitimate concern that some jackass will sue him.

  85. 85
    bitterowner says:

    should read “without the legitimate concern…”

    also, am framing my opinion in the context of coments posted on a RE blog.

  86. 86
    Marc says:

    Sounds like we’re all on the same page and no one will have to sue anyone.

  87. 87
    Alan says:

    Sounds like we’re all on the same page and no one will have to sue anyone.

    You aren’t a very good lawyer, are you?

    I kid.

    Because it’s easy.

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