Case-Shiller: Let the Decline Continue

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.

Case-Shiller HPI: West Coast
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:

Case-Shiller HPI: All 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.

Case-Shiller HPI: Decline From Peak
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.

Case-Shiller HPI: Seattle Price Reversion
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)

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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
    jon says:

    Since the Seattle June MLS price was up, the next month’s CSI is unlikely to go down. Seattle just edged out San Diego in the gain since 2000. It now trails only DC, LA, NY, and Miami in that gain. Miami is falling fast, but Portland is close behind and rising.

  2. 2
    AndySeattle says:

    I can’t wait to see RAL come in here and start whining about the 17 month offset.
    Paging RAL, party of one, your table is ready… RAL?

  3. 3
    david losh says:

    S&P: Home prices drop by record 15.8 pct. in May
    That’s May the beginning of the selling season.
    Into July and August that should be a 20% price decline.
    When REALTORS talk about localized housing market they should be talking about the cost of living. Housing prices are directly tied to the cost of living.
    What I’d like to point out is that cost living in relation to the price of housing is a constant. Prices aren’t declining, values are. It’s the mortgage values that are going down.
    People paid, and now owe more than a proprty was ever worth.
    Another thing that I’ve talked with many people about is the difference between Housing Units and Real Estate. “Worker housing” is now a term coming up through government channels like low income housing was a term a few years ago.
    Some Housing units are nonappreciating assets.
    Just because builders are charging the same or slightly inflated prices for housing units, and people buy them, doesn’t give a fair value of those same units in a secondary sale.
    In that regard I think the real decline in housing unit pricing will become more evident in the next five to ten years.

  4. 4
    David McManus says:

    Weren’t we supposed to get a spring bounce? Will it now be a “Labor Day bounce”?

  5. 5
    patient says:

    Correct me if I’m wrong but isn’t the c/s index a three months rolling index? If it is, doesn’t it take quite significant change to break a clear direction of the month over month reported number to either positive or negative? In other words April would be a significant strengtening in prices ( all time low interest rates for the 30y? ) and May had a significant weakening. So with the relatively strong numbers in April we will likely see a small decline in the June reported index ( the strong April number still being in the set but offset by the weak May number and a likely weak June number ). The next real dropoff should be in the July index reported in the end of Sep. when the April number is no longer in the three months set?

  6. 6
    Gravy says:

    The prices in the 17 month offset graphs don’t track each other well, other than having their peaks lined up and having a downward trend. Even the lining up the peaks up was created by shifting the graph timelines and there is not even a theory proposed about why they should track each other. I don’t know why you keep showing this graph.

    The non-offset Case-Shiller graphs are very useful. Continue the great work. One thing I would like to see on all your graphs is for the the gridlines showing dates to be displayed every year rather than every 4 months. This would help to visualize the yearly cycles as well as the general trends.

  7. 7


    Here’s sample bank rates for this week’s continuous weekly spike:

    30 yr fixed mtg 6.38%
    15 yr fixed mtg 5.93%
    5/1 ARM 5.90%

    This week (July 24 – July 30) the experts say: Mortgage rates still have a ways[a ways, with the recent $300B Housing Bill added in try a huge chunk] to go up.

    The rest of the URL:

    No wonder the media doesn’t flaunt low home interest rates anymore….lol

    Also, weekly interest rate spikes won’t affect 2008 affordability or cause price collapse; yeah, and I have a bridge I can sell ya too.

  8. 8
    deejayoh says:

    Since the Seattle June MLS price was up, the next month’s CSI is unlikely to go down
    you can’t really use Median price to forecast C/S on a monthly basis. Median is a very noisy measure – s/t fluctuations in mix, volume, etc. C/S is much smoother trend since it is a 90 day rolling metric.

  9. 9
    patient says:

    C/S and median also tracks different targets. C/S tracks home values from what people are paying for specific homes, while the median tracks how much people are paying but not what they get for it. Without knowing what was paid for it’s not very useful as a value indicator. The median do however have a huge psychological impact on both sellers and buyers so it’s a measure worth following as well.

  10. 10
    jesse says:

    Look at that! Seattle’s very own bear market rally! See you in 2 years at the bottom, dudes!

  11. 11
    Buceri says:


    Actually, the rates have gone down since last week. They were over 6.5% for the 30 fixed.

    Still, it does not make it a good time to buy.

    A few months ago I was one of the regulars thinking we were going to hit 10% price decline by July. Looks iffy right now.

  12. 12
    Garth says:

    It also excludes flips and new construction which kept the bubbliest sales out of the index when things were going up, and leaves some of the biggest declines out on the way down.

  13. 13
    patient says:

    Buceri, I think you could be very close to on target.
    Last years median for July was ~$480k, I think a median for July 08 of $440k is a pretty good guess. And for C/S I think you will be close as well when July’s index is out in the end of Sep.

  14. 14
    WestSideBilly says:

    Historically speaking, 6.5% is a VERY good rate. Not as nice as the sub 5% loans some people got a few years ago, of course, but not all that bad.

  15. 15
    patient says:

    Remember that the 6.5% rate will hardly buy you an SFH is Seattle or the eastside. There we are talking jumbo rates of 7.5% and above…

  16. 16
    Buceri says:

    Historically speaking, 6.5% is a VERY good rate

    Absolutely – I was just pointing out that Softwareengineer was wrong. Will they go up? Probably.

    And I agree with Patient about the jumbos needed in Seattle and the Eastside.
    Then again, even for Joe and Jane Newlyweds, making $72K combined; a $300K loan is a ton of money at 5, 6 or 7%.

  17. 17
    jon says:

    I think the recent bill made permanent the current higher limits for comforming loans. I have seen anything on the exact numbers for the new limit relative to what the current limits.

    Next month the June sales numbers will replace the March sale numbers in the CSI, so I am expecting a pretty good upward tick. Seattle CSI has been flat now for 4 months, while the top 4 cities I mentioned above are still falling. If that trend continues for another 5 months, Seattle could become the top performing market of the decade. That is pretty striking considering how strong the run up was in other markets.

  18. 18
    patient says:

    There is one caveat with the July mls numbers and that is the time of the year. I would guess that many work transplants have scheduled to move here before the schools starts up again. Many of these will be families that are now home owners and I think very few can pull-off the negotitation to not only up-root their family members but also put them into a rental. More likely the negotitation will be “I know it’s hard but you will get your own room (to the teenager” and you (the spouse) will get the kitchen island, three car garage or whatever floats their boat. They are also likely to be stressed and on a deadline and do not have much time to wait out a good deal or perform long negotiations with multiple offers. This could possibly show up as a temporary strength in the July and August numbers.

  19. 19
    patient says:

    My view is that there are a degree of noise created of seasonal factors and fluctuations in interest rates but be patient the trend and fundamentals clearly indicates a continued decline. Remember that it took years of increasing inventory and decreasing sales before appreciation turned to depreciation. It will most likely take years before we resume appreciation again. This is one boat that doesn’t turn quickly.

  20. 20
    Bits_of_Real_Panther says:

    Bottom => 142 in March 2010

  21. 21
    Rentersarelosers says:

    AndySeattle // Jul 29, 2008 at 8:00 am

    I can’t wait to see RAL come in here and start whining about the 17 month offset.
    Paging RAL, party of one, your table is ready… RAL?


    My posts are being edited and/or deleted by “Free Speech Tim”, and there was no foul language in them.

    So, “no comment”


  22. 22
    CCG says:

    Wow, standardless lending tied to collateral values rather than income has the same consequences here as anywhere. Whoddathunk?

  23. 23
    vboring says:

    seasonality seems to be key predicting when the big price reductions will begin.

    is it possible that we’re seeing YOY price declines of just 6.5% because desperation hasn’t set in yet, but will this fall?

    the other big factor that forces price declines is foreclosures. because we came to the game late, is it possible that our foreclosure rates will be lower and that this will make price declines slower?

    being late to the depreciating price game makes foreclosures slower because banks have no interest in foreclosing properties, so they give people longer before foreclosing and now the housing bailout bill may further reduce foreclosure rates.

    so, which is it? will double-digit price declines begin this fall/winter as desperation catches up with people or will lower foreclosure rates mean that we get to have slower depreciation rates for longer?

    either way, i’m looking at moving to a nice cheap 3rd tier city (pop 100k-500k) that actually has a summer. and maybe a winter. i’m thinking Albuquerque might be nice.

  24. 24
    rose-colored-coolaid says:

    Tim, I look forward to the Case-Shiller updates every month. I think these might be the best resources you provide.

    It would be really awesome to get a second view of the “rewind” chart, which would go back a few years further. Like say going back to 2004 when price appreciation really seemed to get out of control. That would help the potential buyers out there get a better gauge of where the market might be heading.

  25. 25
    being patient says:

    There has been a lot of talk on this site about inventory levels in the level.

    I have a few questions. I am not looking for extact numbers here but wonder what some you think.

    1. How much of the inventory are short sales and foreclosures?

    2. How much of the inventory is people that need to sell due to other reasons?

    3. How much is homeowners just trying to see if they can sell but then don’t need to move for any specific reason?

    I would think that these things would effect the inventory levels.

    For example we removed all the sellers who really don’t need to sell. What would the inventory level look like.

    Also it looks Seattle has held up alright considering the mortgage crisis.

    Just my thoughts.

  26. 26
    david losh says:

    Nine metropolitan cities _ Las Vegas, Miami, Phoenix, Los Angeles, San Diego, San Francisco, Seattle, Wash., Portland, Ore., and Washington, D.C. _ posted record lows in May. And the value of housing in Detroit is now lower than it was in 2000.

    This is the story Real Estate agents have been tracking today.

  27. 27
    vboring says:

    “Also it looks Seattle has held up alright considering the mortgage crisis.”

    so far.

    it has yet to be seen whether being late to the party will make our correction more or less violent than has been seen elsewhere.

    people have seen that prices falling 28% in 1 year is possible, so there should be more fear here than there was in Las Vegas when they were only down 6.5% YoY and were convinced it was just a small pullback before prices rocketed to infinity.

    but, we just passed a housing subsidy bill, so maybe this will reduce some of the fear.

  28. 28
    being patient says:


    Comparing to other areas is difficult.

    Anyhow didn’t many of the major areas see a large downfall when the mortgage crisis really hit hard in the last year?

    How much of a decline did Seattle see before the mortgage crisis? I haven’t really followed the numbers so I am not sure.

    Like it has been said over and over the areas that went up the most have been the hardest to fall.

    It seems like there are so many factors that go into figuring out the price of real estate. Getting funding is a big factor for buying a house.

    I have read that people think real estate will drop 30% and some think even lower then that.

    I might be wrong, Seattle seems to be holding its own. Time will tell.

  29. 29
    being patient says:


    I was wondering and maybe I missed this somewhere.

    Can you dig up information on how many of the listings out there are short sales and foreclosures?

    Just curious

  30. 30
    jonness says:

    Very cool! Something I noticed from using my median price charting tool is that Seattle, Tacoma, Spokane, Portland, Olympia, etc. have the same general price pattern as each other. I hear arguments that Seattle is special because it is surrounded by water etc. But if that is the case, why do all the other cities around it have the same general bubble pattern?

    It is interesting that the NW cites are also showing the same pattern as California but lagging by 17 months. It doesn’t seem to me that we will go down as far as CA because we never had the same run up, and our buyers were less exposed to risky loans. Unfortunately, the New York Fed removed the historical data to its high interest loan chart, so I can’t get a really good idea of how we might be correlated to California’s risky loan exposure pattern.

    That being said, prices went up due to economic fundamentals that no longer exist , so they WILL correct. I expect the typical 4% appreciation will eat away and help make up the difference as time continues, but I also expect to see continued price deprecation until prices line up with fundamentals.

    So I made a new tool that allows you to plot various compounded interest rates against historical prices to get an idea of what might be considered normal.

  31. 31
    jonness says:

    I’m trying to get a handle on what median home prices mean. It seems to me they are a measure of what most of the homes sold for (or were listed for?). This doesn’t appear to be an accurate indicator of house price depreciation. Let’s say a family decides to buy a house for $400,000.00. They hold off buying for a year hoping prices will come down. Lucky for them, a year later, interest rates are the same, and they pull the trigger and buy their house. Judging from what I am seeing in the marketplace, the homes that are selling are way more discounted than 6.5%. So the family might spend the exact same amount but get a WAY nicer house. In this respect, I believe falling median prices lag true market depreciation.

    I see lots of houses listed for very high asking prices, but the ones that are moving are turn-key remodels that are priced aggressively in today’s market. People are buying, but they expect value for their money.

  32. 32
    Agent says:


    Approximately 84 Bank Owned properties in King County which are active home listings (excludes condos, includes all active, contingent, and requested b/u).

    $1.2 mil high price, $138k low price, $289k median price.

    Approximately 680 short sales listed in King County, did not do stats on those.

  33. 33
    david losh says:

    In the Seattle area from the Central District to 145th there were only 75 residential , and about 40 condos short sales in active pending and sold staus according to the NWMLS.
    Foreclosures are a much tougher number, but it’s low. Most lenders are holding Seattle area homes at market value which is turning out to be much closer to a 20% reduction from last years high.

  34. 34
    Scotsman says:

    A bit off topic, but ultimately relevant to the current discussion of falling home prices. Here’s a link to a very good summary of the current economic climate in the U.S. and it’s various bubbles. Lots of pictures drive home points that are hard to get through discussion only.

  35. 35
    mukoh says:

    Scotsman the posts are always so level on other blogs it is exciting. Especially the BMI Index chart was very informative. The body mass index is as we all know at least 70% of the home price. :) LOL

  36. 36
    Herman says:

    To jonness #29.

    Nice tool. So Seattle RE has tracked to about a 6.5% annual increase since 1985. The first spike in 1990 took 6 years of below-normal appreciation to correct back to the norm.

    The spike in 2005 looks like it is now 1 year into the correction with about 4-5 more to go. Meaning normal appreciation would resume in 2013. Dude, that’s a long time to wait before buying a home looks good on paper.

    It’d be nice if we could get some substantial price beat-downs to accelerate us back to the norm, but the Federal government is not going to allow it (as I have stated in previous posts).

  37. 37
    david losh says:

    Scotsman that is a great link. It shows vividly what happened here.
    In the Real Estate business bad news is good news and this is very good news.
    No you don’t have to wait to buy or a bottom. The downward pricing pressure will come from agents making BMW payments. You need to sell now and sell for less so we can get that deal together.

  38. 38


    No, you’re on topic in my book….the whole mess has hit the fan and the downward trend in Tim’s charts and your blog are “Tweedle Dee and Tweedle Dum”.

    I read your wonderful URL and re-published it’s reference in the comments section of Dr. Roubini’s RGE blog:

    My comments in the RGE blog stated:


    Rather than blog on and on with supporting rationale for my title, here’s a great URL to read that sums it the mess we’re in all up:

    A great opinion blog the above URL is, but I disagree or would clarify with one fundamental flaw [in my opinion] it states in part:

    “….4. pension and entitlement programs designed for 10 workers for every retiree are now facing 3-to-1 or even lower worker-retiree ratios….”

    The thirst for more pension growth [recent American overpopulation growth since 1990, i.e.] has made it far worse and in my opinion [excluding the preditory lenders] is the root cause for the credit crisis housing panic demand to “buy too much now, before its too late” we’re experiencing today. The article clearly excludes this root cause explanation.

    Kudos for it on this excerpt:

    “….6. stagnant/declining wages and rising unemployment are the inevitable result of reduced borrowing/spending by consumers and government alike….”

    The American addiction to continuous population growth to mysteriously prop up future pensions is a pipe dream. Our wages collapse faster and as more bailout debt is incurred with world recession banks tightening credit in unison, I predict $100K average priced homes in America needing 30 year fixed 20% down and a minimum $100K household incomes [with no debt] to qualfy soon at a theater near you soon, if uncontrolled growth [overpopulation] continues on the reckless path it’s been on since 1990.

    Correct me, if you think I’m wrong.

    Written by Softwarengineer on 2008-07-30 09:53:47

  39. 39

    I LOVE the “Total Decline From Peak chart, Tim. Can I use it? I met with a client last night that said financial experts tell her it’s a year or two and not drastic, while I am saying it could be 3-5 years and 35% to 50% from peak before it turns around.

    This chart is like Clint Eastwood’s “Do you feel lucky today?” Do you feel like a Boston or a San Francisco?

  40. 40
    Joel says:

    while I am saying it could be 3-5 years and 35% to 50% from peak before it turns around.

    Wow, get ready be ostracized. Even around this blog suggesting prices might fall more than 30% is generally seen as crazy.

  41. 41
    patient says:

    Wow Ardell, you are sticking your head out in the agent community. When anyone as much as hints to a possibility of 50% off the immediate response is ALWAYS, it will never happen!. Never an explanation just a statement that it will never happen. I think most non agents here do not predict a 50% off, I think 30% off is more common but noone will say that it can’t happen, since it can.

  42. 42
    Cheapseats says:


    Regardless of what may or may not happen, I think it is good that you would consider using charts of other metro areas to at least display feasibility to customers.

    Or, I would equally think that it was an interesting effort to gain (long term) customers who would appreciate such a tact. I for one would appreciate a realtor who didn’t tell me that today was a great day to buy.

  43. 43
    The Tim says:

    Ardell, feel free to use any charts you find on here anytime.

  44. 44
    TheHulk says:

    Right up until December 07, prices kept rising and homeowners saw increases in paper wealth. Suddenly the lending market imploded. All homeowners are suddenly concerned and they start asking questions. To that, realtors respond with the typical bull about how seattle is special, such things could never ever happen here blah blah blah.

    OTOH, some people have seen friends lose upto 20% value in a single year in phoenix / vegas etc. Some are even courageous enough to call the realtor’s bluff and put the house on the market. After all spring is the peak selling season! Now spring is gone, the clouds are coming back and no, sadly they are not the lovely dark clouds up in the sky, these are mean ass cumulonimbus sized equity stomping clouds!!

    Spring has gone by. There has been no bounce. Brand new houses on the eastside (yes, i have seen a couple in redmond) are already selling around 2006 levels. The economy is in a tailspin, interest rates are a risin and those arm resets, hmm they will be coming soon. Even though the clouds in the sky look far away you certainly cannot ignore your Arm resets.

    Realtors will still try to reassure customers (buyers are just holding out, the govt is helping you out!). The panic will truly set in time around september/october and then we will see 10-15% declines across the board by the time xmas rolls around.

  45. 45
    jonness says:


    6.5% fits Seattle like a glove. Thus, Seattle is 16% overvalued according to the chart. However, Global Insight’s more in depth analysis puts Seattle at 22.8% overvalued, which is arguably more accurate because it takes additional factors into consideration.

    In Santa Barbara and San Diego, massive recent price drops have led to a 6% annual price increase from 1985 to 2008. These desirable cities have appreciated less over time than Seattle and are still dropping in price. That makes Seattle a little suspect IMO.

    Roughly 2 years ago, Global Insight rated Santa Barbara as 58.9% OVERvalued. It is currently rated as 3.2% UNDERvalued and is continuing to drop in price. San Diego has seen a similar rapid correction and is now considered 9% undervalued.

    This is evidence that once a regional area gets underwater, price corrections can take place at a rapid rate.It doesn’t matter what puts owners underwater, it only matters that they get there. For California, perhaps it was extreme exposure to subprime loans that triggered the freefall. In Seattle, it could be moderate exposure to subprime coupled with entering a recession along with job losses and rising interest rates that triggers the correction. IMO, if rent to own ratios and income to home price ratios are far enough out of line, and people get underwater, the correction will come.

    I think there is a good chance that Seattle will see a fairly rapid correction of its current 22.8% overvalued rating, and along with the continued appreciation trendline of 6.5%, it could drop well into the undervalued range before this mess is straightened out.

    In the meantime, the government is printing money in an attempt to inflate out of this mess, which could slow the price decline. However, the accompanying inflation actually seems to be aiding the price decline.

    I’m not an economist, so take my opinion with a grain of salt, but I see Seattle prices being at much more realistic levels 2 years from now.

  46. 46
    Rentersarelosers says:


    Actually I do follow this board as you “geniuses” are perfect contrarian indicators for me.

    Several days ago some Bubblehead wanted to stick my nose in a bad Dow day so I bought the market using an Ultra (2 x move long) fund. Up some 550 points and climbing since that dumb Bubblehead call. I hope he went short.

    And you jokers think you can call the bottom in the Seattle Real Estate Market?



  47. 47
    richardjls says:

    Of course agents now need to leverage sellers to lower the asking price…Good grief…there’s a commission at stake! Better to screw over sellers and/or buyers than to go back to work as a (fill in the low wage “career” here).

  48. 48
    richardjls says:

    Ardell, Seems really odd to consider 50% when your REAL ESTATE BLOG (she’s linked it for us…) says prices are only down 4.8%. Hmmmm, wonder if it’s to get buyers????
    There’s lots of really cool advise on her web site though….such as which colors sell homes best.

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