Case-Shiller Tiers: Three Tiers, One Decline

Here’s our monthly look at Seattle’s price tiers from Case-Shiller. Remember that Case-Shiller data is based on single-family homes only, no condos or townhomes, and that Case-Shiller’s definition of the “Seattle area” is King, Pierce, and Snohomish counties. For anyone wondering how the tiers are chosen, check out last month’s post.

Now here come the graphs. First up is the straight graph of the index from January 2000 through February 2008.

Case-Shiller Tiered Index - Seattle
Click to enlarge

The low tier looks like it’s having the steepest drop from the peak, but the difference is very slight. Right now all three tiers are falling more or less together.

Here’s a chart of the year-over-year change in the index from June 2002 through January 2008 (I selected that date range to match the time-shifted graph in the standard Case-Shiller posts).

Case-Shiller HPI - YOY Change in Seattle Tiers
Click to enlarge

Even the high end tier has now dipped into negative YOY territory. Here’s where the YOY price change for the three tiers sit as of February – Low: -3.7%, Med: -3.5%, Hi: -1.1%.

Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.

Case-Shiller: Decline from Peak - Seattle Tiers
Click to enlarge

The drop in all three tapered off a bit last month. As things sit right now, the total decline from peak varies less than 1 percentage point across the three tiers, from a 7.1% drop for the low tier to a 6.5% drop for the high tier.

Not much else to say about this particular set of data. Right now I don’t see any really interesting or unexpected patterns emerging as price declines finally get rolling here in the Pacific Northwest.

(Home Price Indices, Standard & Poor’s, 04.29.2008)

0.00 avg. rating (0% score) - 0 votes

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.

29 comments:

  1. 1

    SEATTLE IS SITTING ON A POWDER KEG

    The local news downplays the 15-20% national home price collapse, because Seattle is like 1/5th the rate degragation. LOL

    This city and surrounding subarbs are sitting on a powder keg to implode in price. Its clear. Simply put, the zero down jumbo arm and leg refinance scheme doesn’t have the 5-10% price increase net to save owners and the banks anymore. Seattle is full of these types of loans the last 5 years and it isn’t just subprime, its like cancer its eating into approximately half the recent sales.

    How do you refinance your ARM without an equity down payment? I know, use that magic wand GW Bush talked about yesterday to fix the economy. Or dig into the 10s of thousands of dollars, all the new owners have saved in bank cash. LOL

  2. 2
    Slumlord says:

    The tiers seem to show that no market segment is immune from the downturn. It would be interesting to see a breakdown based on geography. I don’t know if the Case-Shiller data allows for a county-to-county comparison, but it would be cool to see one. Even better would by a city-by-city or neighborhood analysis.

  3. 3
    AndySeattle says:

    As the endearing old man announces on every ride of Big Thunder Mountain at Disneyland: “Hold on to your hats and glasses kids, it’s the wildest ride in the west!”

  4. 4
    jon says:

    If the problem in the market is because of 2 year ARMs resetting, then to look for a price collapse I think we should be looking at the price changes as Y over 2Y ago. That is still positive for Seattle, so those owners will be motivated to keep up on their payments. In cities where YO2Y is negative, I would expect those markets to have much bigger foreclosure problems. Maybe that’s why the San Diego’s etc are still plunging after being in decline for so long already.

  5. 5
    david losh says:

    sell now or be stuck with that piece of poop forever!

    just kidding. i was thinking this morning why prices on houses don’t go down, or for that matter why they go up. supply and demand isn’t working for me.

    financing options aren’t working for me. the credit market imploding isn’t working for me; credit is more than mortgages.

    my experience is that prices fluctuate then settle for more than they were before. the stock market has turned out to be the same way. why?

  6. 6
    Ray Pepper says:

    David how about a nice espresso/sandwich/ice cream shop? I have two for you. You want one in Nevada? I have a great one there as well. 190k on Main Street. http://www.BerneyRealty.net …280k in Tacoma. You can have the dogs sit in the truck. While you and I watch your money roll in. Cash Cows but guess what I will sell you both. Financing options not working for you? I have sources..

    Sure SBUX has tanked but people love the Mom and Pop shops in trendy areas. Its an ANTI SBUX regime out there. Maybe you can give up all the rehab and make sandwiches and drinks all day and live upstairs. You will love Fallon.

    I used to do the fixer/rehab game. Its exhausting. There is a far better way. It just takes effort. Cost of materials. Battling the Home Depot and Lowes return lane lines. Forget it. Simplify your life.

    Off to Reno and Sacramento for round 4 our investor tour closures. Just so much opportunity and so little time. Forget the residential homes. Its the commercial tgts we hit.

    Dig David. Find your Gems! Trust me they are out there!

    Ray Pepper
    http://www.500Realty.net

  7. 7
    Ray Pepper says:

    oooops…www.BerneyRealty.com …..click commercial…..David I can see you turning Yummees into a GOLD MINE! I can get you the biz for 25k. Just give me 165k for the building and its all yours………….

    just so many options out there.

  8. 8
    SeattleMoose says:

    Right on schedule…..ALL ABOARD!!!!

    Next stop….poor house.

  9. 9
    rose-colored-coolaid says:

    Are we seeing a spring slide? I expected to see a dead-cat spring bounce, but the numbers don’t seem to be going that way. Rather than see a recovery in the spring, it seems like the numbers are just pointing to a slightly less bad decline.

    Based on this, I’d like to coin a new phrase – “Dead-Cat Slide”. A dead-cat slide is what happens when you throw a cat off a hill that is so steep that when it does eventually hit the hillside it just starts sliding and rolling down the side. It’s still essentially in free fall, but it’s got just a little friction slowing it down.

  10. 10
    biliruben says:

    Is that dead cat frozen? I hope so, for the imagery’s sake. Otherwise pretty quickly you wouldn’t know it was a cat.

  11. 11
    rose-colored-coolaid says:

    my experience is that prices fluctuate then settle for more than they were before. the stock market has turned out to be the same way. why?

    Gee, maybe it’s because for prices to change (up or down) they must ‘fluctuate’? If they aren’t fluctuating, they are by definition remaining constant. E.g. every day, stock prices fluctuate, and then at around 4pm EST they settle until 8am the next morning.

    Or are you asking why stock prices ‘always go up’? The answer to that is simply that stock prices should mirror the overall future of the economy. If economic growth stopped and then rolled backwards for a sustained period of time, the stock market would fluctuate and then settle at a lower price.

  12. 12
    rose-colored-coolaid says:

    #10 how about we stuff the cat instead? It’s a nicer image overall, but I agree that the cat doesn’t look so hot by the time it actually hits the bottom.

  13. 13
    Michael says:

    We are in a whole new world of mortgage banking that is impossible for anyone to describe. The derivatives market is now at 45 Trillion! That means that all those funky little mortgage backed securities are leveraged at rediculous rations – maybe 30/1. If you think the banks ballance sheets are remotely valid your crazy – everything is in the Structured Investment vehicles. The Fed, stockholders, and banks have no idea how the economy is structured because everything is off the books thanks to the genius of unregulated financial engineering. I think this mess can only be described by the greatest economic genius of our generation – Public Enemy.

    “Don’t Believe the Hype”

    Question: If the derivatives market is bigger than the stock market then how the hell can anyone possibly write a report about state of our economy? Their are no metrics that can describe the state of wall street.

  14. 14

    First we’re talking about our cute little pets, now we’re talking about dead, frozen, and stuffed cats?

  15. 15
    Michael says:

    Don’t forget about the 4.5% inflation rate. We should add that into the year over year decline!

    But wait! Is that the real inflation rate or just the reported inflation rate?

  16. 16
    david losh says:

    the stock market goes up as a whole, gees i forgot the whole part, over a long period of time, the same as housing prices. it’s a long progression. even in two previous recessions housing prices settled to fit that long escalating climb.

    we saw the stock market hit an unsustainable heighth above all reasonable expectation. then there was the microsoft lawsuit and the stock market collapsed but only down to where it made sense again then started it’s climb again.

    the stock market was 4000 in 1995, it’s 12000 today. same with housing prices. my bet is that housing prices across the board in all parts of the country will return to 2004 or 2005 levels and stay there.

    my question is why doesn’t the stock market go back to 4000 or 6000? why don’t housing prices return to 1995 prices? it just doesn’t seem like they will.

  17. 17
    Alan says:

    Housing does not produce value and grow.
    Businesses do produce value and grow (at least some of them do). What’s more is that growth build on itself exponentially.
    That is a fundamental difference between the stock market and the housing market.

    One can argue that housing does produce value in the form of continuing shelter and I agree. However, that shelter “production” does not create more shelter that can be used to create even more shelter. In fact, the value of that shelter production can be estimated by looking at what someone is willing to pay for one month of supply. We call this rent. When comparing housing to the stock market, you should think of housing as a no-growth company that pays a monthly dividend. Build an index of companies that meet that criteria (think regulated power companies) and I bet you will find long term similarities to the housing market.

  18. 18
    Civil Servant says:

    A bit o/t perhaps, my apologies, and rushed because I have a 2:30 meeting. I’m just back from a CityClub forum that featured Kevin Phillips (“Bad Money,” so good btw) and Judith Runstad (longtime real-estate and development lawyer and former Chair of the SF Fed). Topic was “The Current Economy: How Much Can the Market Bear?” Some discussion of the local real estate market and prospects for the next few years. Both Runstad and the people at my table, in pre-event chitchat, noted that the Seattle market is in much better shape than those elsewhere in the country, see for instance our tiny 2.7% YOY CS drop compared to monstrous drops in CA, LV, etc. ARGH. Does anyone have insight into why very intelligent people can’t understand that it *matters* in this regard that Seattle’s market peaked much later than did others, that a direct comparison at a given moment is not probative? Also Runstad posits that Seattle has a bit further to fall but not that much because our Growth Management Act has insulated the area from the vast outlying new developments that she sees as problematic in other cities. Yes? No? I don’t have the background in that area, would appreciate wisdom. Thanks.

  19. 19
    deejayoh says:

    Build an index of companies that meet that criteria (think regulated power companies) and I bet you will find long term similarities to the housing market.

    Good argument Alan – but actually, I think the return on housing would be slightly less than for the utility. The utility has growth in demand – both in terms of population served and consumption per person – so they get a fixed return, but on a growing asset base. The utility of the house never changes (unless you cut it up into apartments, I guess)

  20. 20
    deejayoh says:

    Runstad posits that Seattle has a bit further to fall but not that much because our Growth Management Act has insulated the area from the vast outlying new developments that she sees as problematic in other cities

    Wait, wasn’t that the reason we could never fall in the first place? Oh well. Time to move to plan “B”

  21. 21

    Judith Runstad is the wife of Jon Runstad, CEO of Wright, Runstad, and Co, a big downtown developer, so it’s not exactly that she has no dice in the game.
    The Growth Management Act has been blamed for this area’s high construction costs, developers have railed against it…now she’s praising it?

  22. 22

    IRA, DID YOU REALLY MEAN GROWTH MISMANAGEMENT ACT?

    That sounds more like our clogged city since 1990.

  23. 23
    Alan says:

    You are right, DJO. But utilities are the closest thing I could think of that might be a similar investment to housing.

  24. 24
    Civil Servant says:

    Runstad, duh — thanks for the connection, Ira.

    I mean, am I right that Growth Management Act or no Growth Management Act, months of inventory is a meaningful statistic whether the units of same are McMansions in a far-flung development in Phoenix or McTownhouses in Green Lake? In this context the GMA seems like a red herring. Also potentially of interest here: as part of the discussion about peak oil and energy policy, Runstad said that sooner or later the city was going to have to realize that we need more, not less, urban density, more units created close in. I don’t necessarily disagree with this, as long as those units are well constructed and have some character — but even the ugly particleboard ones, even were we to see a real downturn, would not be affordable for most people in Seattle. (So, yeah, the real estate developer’s perspective.)

    Disclaimer: I’m not slagging on the lady. She may be biased, but she is smart, articulate, extremely well read, and concerned about US health-care policy. I’m just a skeptic and a regular visitor to this site, is all.

  25. 25
    david losh says:

    An associate and i were in Bellevue a few minutes ago. There are concrete and steel structures going up there with glass shells. Like or not that is good construction in my opinion. Partical board construction is crap, in my opinion. Partical board on concrete commercial space is crap, and that’s what Seattle builds.

    When or if the Seattle down town core gets built no self respecting yuppie is going to live in Fremont or Ballard. All those town houses will be rentals until they are torn down to make way for real development. Let’s see, if i were a lawyer looking to make partner, as the saying goes, am i living in Ballard, Belltown, or down town.

    The rentals are built waiting for interurban.

    I like the utilities analogy comared to housing prices. It really is a mystery to me why the entire world population started paying two or three times the value of property. Mortgage rates aren’t making it for me.

    Just because mortgage money is 5% rather than 10% i don’t see how that raises the price of housing. You can pay more because the payments are less? I don’t get that logic.

    We really are at the barn door after the horses have gone, but it is global.

  26. 26
    deejayoh says:

    You are right, DJO. But utilities are the closest thing I could think of that might be a similar investment to housing

    I think it’s a great comparison. That should have been an “and actually” in my post. I was riding on your coattails.

  27. 27
    Garth says:

    The lawyers I know who are partners live on Mercer Island and in Laurelhurst, and they don’t own townhomes.

  28. 28
    david losh says:

    if i were a lawyer looking to make partner, as the saying goes

    you need to be close in to generate more billable hours.

    at $270 per hour, getting in an hour earlier, or leaving several hours later, then walking from work to home; it adds up fast.

  29. 29
    explorer says:

    deejayoh // Apr 30, 2008 at 3:10 pm
    [i] Runstad posits that Seattle has a bit further to fall but not that much because our Growth Management Act has insulated the area from the vast outlying new developments that she sees as problematic in other cities

    Wait, wasn’t that the reason we could never fall in the first place? Oh well. Time to move to plan “B”[/i]

    What Runstad was likely referring to was the GMA limited the amount of land and density that is available to residential RURAL deveopment, in RURAL areas, so they did not have as much to lose to begin with. Greenbelts and all, ya know. However, that is OUTSIDE of Seattle and the other cities in the county proper. It really was a empty statement, IMO.

    And yes, I have heard many-a-ranter complain about the GMA being the root of all housing evil, and the limitations it puts on the frontier mentality, but they never seem to get that the GMA was designed to keep development sustainable. Unregulated and unlimited expansion implodes and eats itself. This ain’t the Wild West anymore. There are limits to what can be sustained.

    What is not like other areas, is the fact that developers are not required to kick in for the new infrastructure needed to support the developments that are approved, unlike in most of the rest of the country.

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.