Poll: January’s Case-Shiller Index for Seattle will be ___ off peak.

Please vote in this poll using the sidebar.

January's Case-Shiller Index for Seattle will be ___ off peak.

  • <10% (8%, 16 Votes)
  • 10%-11.9% (16%, 31 Votes)
  • 12%-14.9% (32%, 63 Votes)
  • 15%-20% (29%, 57 Votes)
  • >20% (15%, 29 Votes)

Total Voters: 196


This poll will be active and displayed on the sidebar through 10.25.2008.

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.

39 comments:

  1. 1
    Thomas B. says:

    I think the Seattle market will be off 20% from the highs by January because the Seattle market if finally realizing reality, but I’m making a bold prediction; the market will slowly stabilize in the months after January.

    While the stock market is going through violent convulsions, it does not mean that good companies will survive. Those companies that are well run, have good balance sheets, and/or have good cash reserves will survive and will be looking to position themselves for the future. Microsoft will continue to grow and may accelerate growth next year to position themselves to crush opponents while they are weak (Yahoo? Google?). Microsoft also has Windows 7 coming out which is a critical moment in the company’s history, Balmer will not flub twice. Costco will do well in a recession and probably will seek to expand while real estate prices are cheap in order to compete with Wal Mart. Additionally, if I were a CEO, I would be aggressively seeking to renegotiate leases. Finally, Weyerhaueser has been well ahead of the power curve in addressing the downturn. I wouldn’t be surprised that they start positioning themselves to compete on the world market. While all this won’t immediately help the real estate market, it may stabilize the market.

    As Warren Buffett once said, buy on fear, sell on greed.

  2. 2
    anony says:

    The stock market may slowly stabilize in the months after January, The Seattle housing market, not so much.
    The rest of the bubble markets, having already seen significant correction, may see housing markets stabilize. Seattle has to see prices drop to a reasonable level first. More so if interest rates rise.

  3. 3
    david losh says:

    The stock market took years to settle. I think 8000 is where it should be. Housing prices need to correct at least another 20% across the board with some markets having more sever correction.

    It would take sales in that reduced price range to make the data. That is becoming more of a problem than I would have ever realized. Even here people are talking about price stablization.

    What I really don’t understand is lenders creating loans on over priced assets. The concept of a buyer’s ability to pay I get, but the lender is securing a loan with an asset. What would that rational be?

  4. 4
    Jillayne says:

    Hi David; “What I really don’t understand is lenders creating loans on over priced assets”

    Right now, banks must make loans to survive. GOOD loans with a high probability of repayment which is why we’re seeing that yes, banks ARE lending, but they’re lending to the cream puff borrowers, and returning to sound underwriting guidelines, which I predicted back in February:

    http://www.raincityguide.com/2008/02/02/pondering-the-2008-rmbs-vintage/

    I’m still gravely concerned about the FHA mortgage insurance program, David. 3.5% down is not much considering that most people who have taken this poll so far believe CS will be at least 10% off peak or more.

    This transfers the risk fromthe banks to the FHA home mortgage insurance program setting up the stage for an FHA bailout and perhaps massive government intervention in loan modifications, further prolonging the housing downturn as re-modified loans re-default.

    Some would say that at least this spreads the pain out. Instead of a giant crash, we get prolonged declines in the housing sector, which prolongs the recovery. I prefer to just take the bandaid off all at once but I’m not an elected official. Which should remind us to remember those elected representatives who voted NO for the bailout.

  5. 5
    Everett_Tom says:

    WAMU president tries to sell his Seattle home at almost twice what he paid for in in 2005, you’d think he would have noticed that housing wasn’t doing so well….

    http://seattletimes.nwsource.com/html/businesstechnology/2008283554_sundaybuzz19.html

  6. 6
    Scotsman says:

    Denial still rules, and probably will until well into next year. The same dozen properties that were for sale last spring in my neighborhood are still available, none of which have seen price reductions of more than 10%, many of which are also for rent- with no takers. Eventually the reality of what’s to come, plus the carrying costs, should wear the sellers down- but it hasn’t happened yet.

    In looking at price movements of past bubbles, in all kinds of markets, one thing that really stands out is how symmetrical the run-up and subsequent fall of prices is. If you recognize that bubbles are largely a function of human psychology, the economic conduct of crowds, not underlying fundamentals, the idea makes more sense. Bubbles take as long to unwind as they do to build. With that in mind, we can predict that the run-up from 2000-2007 will be matched with a decline from 2007-2014 or so. We have a lot of ground left to cover, and indeed are just getting started, despite what everyone wants to see as significant corrections already behind us.

  7. 7
    G4George says:

    Scotsman, you were thinkingg along the same lines as me and what I was writing in my email.

    We keep talking about the Seattle market and in my opinion that is the whole crux of the issue; there is no market. I have looked at a lot of houses in the last 3 months and I am not aware of one actually being sold and definitely none of the houses I would consider buying (if the price was right) have moved.

    Until there is a market there will be no stabilization (to state the economic obvious). Importantly, every day it takes for a market to appear the lower the final point at which the market will settle. Psychologically Joe Public’s view of the housing market has gone through a negative paradigm shift and the longer the market takes to find its bottom the worse the psychological damage will be and the more nervous buyers will be about entering the market again.

    Put another way, this is Seller’s problem to solve and they are the only one’s that can solve it. The seller’s need to create a market as soon as possible by pricing correctly and not just staying one step behind the market as it goes down or their pain will be all the greater. Hoping that politicians will solve the problem or that some benevolent soul will view their property differently to every other property on the marker just means that for the vast majority the price they will finally get for their property will be even lower.

  8. 8
    Jillayne says:

    Hi Everett_Tom,

    I saw that article. My first question was, what was he doing buying a home here in 2005? I thought he was running a bank back east until now.

  9. 9
    Ben says:

    Tim! Dude! You did my poll idea! That is awesome! Maybe it was a coinky-dink but it still feels cool.

    I think he combination of no crazy loans and the negative consumer environment, as well as the overpriced RE around here, will drop the CS more than 20% from peak. The only stuff selling is stuff that people have to get rid of, and we know how that works out.

  10. 10

    Jillayne,
    That was Alan Fishman, WAMU’s CEO., who was running a bank back east.
    Rotella was President and Chief operating Officer.
    Maybe he’d heard that real estate never goes down, and maybe he decided to loan money to anybody and everybody because of that “fact”.

  11. 11

    Is anyone looking at the data before they vote? The majority of the votes are predicting a drop in the neighborhood of 20%. Yet the current data shows that Seattle housing is worth over 90% of where it was at the peak. It would be almost statistically impossible for Seattle to drop 10% in three months. Even places like Miami and Vegas haven’t fallen that much that quickly.

    We’re now at a point where the pessimism is rampant, which is exactly why it’s NOT a bad time to buy. Especially with interest rates rising.

  12. 12

    I think as of September we were about 11% off the peak, and January is only a few months away, so I can’t see a huge fall in the next few months, so I think we might be at 15% off the peak by then ( at most), but six or nine months alter that we could easily be at another 5% or so even lower.

  13. 13
    The Tim says:

    Ben @ 9,

    Yes, thanks for the poll idea. I couldn’t remember who suggested it when I posted it this morning.

  14. 14
    G4George says:

    Remember Case Schiller is a lagging indicator. The number in January, that will be posted on the last Tuesday of January, will reflect house prices for November.

    Really the Case Schiller in January will be reflecting what the median house price are currently and not what they will be in January.

  15. 15
    The Tim says:

    John van Ommen @ 11,

    As of the July data (the most recent), the Case-Shiller HPI for Seattle was off 8.2% from the peak. Since peaking in July 07, Seattle’s HPI has seen month-to-month declines as large as 1.75%. Six months of 1.75% declines would bring the index to about 17% off the peak.

    That doesn’t seem all that necessarily outside the realm of possibility to me.

  16. 16
    EconE says:

    John van Ommen…

    worth more than 90% at the peak?

    If I find you a condo selling for 25% off peak (or more), are you willing to make up the difference between what the purchaser of a near carbon copy unit paid in 2007? I’d bet that the owner would like a refund if at all possible.

    No?

    I didn’t think so.

  17. 17
    Everett_Tom says:

    Jillayne and Ira,

    Maybe he figured that it was all the Media’s fault and was trying to lead by example? Who knows.. Or there’s that rumor that even if the median the drops the high end NEVER goes down..

    who knows.. Regardless of how he got it, I’m surprised at the price point he’s decided to put it on the market at…

  18. 18
    anony says:

    Jillayne, Ira, and Everett Tom,

    I think you may be making the assumption that this ex bank executive is competent and makes rational decisions. That may not be a valid assumption.

  19. 19
    hzg says:

    The C/S index will be as follows

    Oct release (August data) 174.30
    Nov release (September data) 171.87
    Dec release (October data) 169.35
    Jan release (November data) 166.95

  20. 20
    shannon says:

    Interesting tidbit about Stephen Rotella house…it seems to be sold to him by Jean Enerson after a property settlement. It has a 2008 assessment of $5,402,000

  21. 21
    Curtis says:

    is it true MS will start laying of FTs and contractors?

  22. 22
    Jimmy says:

    Curtis,

    There is no news on MS layoffs yet… just a hiring freeze. That being said, given the executives new compensation metrics… I think it’s only a matter of time. My guess is they will announce a round of layoffs after our quarterly results are released.

  23. 23
    deejayoh says:

    hzg // Oct 19, 2008 at 6:35 pm

    The C/S index will be as follows

    Oct release (August data) 174.30
    Nov release (September data) 171.87
    Dec release (October data) 169.35
    Jan release (November data) 166.95

    HZG –
    IIRC the peak was ~192, so you are saying prices will be off about 13.5%?

    Makes sense to me. Are you using an inventory driven model?

  24. 24
    Herman says:

    Everyone should read G4George’s post again, because he is right on.

    Nobody wants to be a chump.

    Since the number of houses being sold right now is insignificant, it’s impossible to gauge what the “right price” is. Without the benchmarks of other sales, it’s hard to tell if your price makes you a chump. So the buyers will only move if the price *extra low* and the sellers (who don’t want to be chumps either), also lack good statistics, and assume they should hold at roughly last year’s price.

    That creates a gap. That gap kills sales. Without sales, the process continues, and every day that goes by the “right price” drops.

    The sellers can prime the market again, but only if they slash prices in order to bring in some buyers so the rest of the buyers can see some confidence-building price benchmarks.

    If there is a reason for RE agents to exist, it should be to orchestrate this and restart the Seattle market.

  25. 25
    george says:

    15-20 percent off the peak. Scotsman is right and that’s why so many smart people missed the bubble in the first place and most current forecasts are still way too optimistic.

  26. 26
    stephen says:

    This transfers the risk from the banks to the FHA home mortgage insurance program setting up the stage for an FHA bailout and perhaps massive government intervention in loan modifications, further prolonging the housing downturn as re-modified loans re-default.

    Jillayne,

    I don’t think it will matter much on a going forward basis. The extent of the problem now is not because of the actual percentage of real people walking away from loans as much as it is that the entire pool of sub-prim and Alt-A loans were leveraged into values that they were not worth, distributed throughout the entire financial community (often releveraged serveral times ) and then when re-valued after defaults moved past acceptable levels mark to market, it trashed balance sheets worldwide. Everything forward that point is just a domino effect of that fact.

    FHA loans now are not being leveraged like that and the Insurance hit will likely be small as the actual number of future defaults on their documented loans will be manageable.

    All of this IMHO…

  27. 27
    Sniglet says:

    Looking into my crystal ball, I would guess that Case-Shiller would show a 12% to 15% YoY price decline for January 2009. In January 2010 the decline would be more like 20% (which would be something like a 32% drop from 2007 prices).

    Looking even further ahead, the price decline for January 2011 might see a 35% YoY drop (down some 67% from 2007).

    The price declines will really start to pick up when sackings from our biggest regional employers take place in earnest at the end of 2009 and through 2010. It won’t just be the loss of jobs that will hurt the market but the psychological impact of seeing companies bleed red that everyone hitherto believed to be unasailable.

  28. 28
    mukoh says:

    Jimmy,
    Stop posting about freezes as well as layoffs that you have no idea about. Unless you want to be next.

  29. 29
    Markor says:

    There are now six or so small houses in Bellevue for $399,900 to $399,950. Gotta go for that extra $50! Too bad the comps for $350K are not selling. With the market prices at ~$325K now, I’m confident the low-end list prices will be less than $300K by next fall. Sellers should capitulate eventually.

  30. 30

    Markor,
    The other difference is house quality. There were a few under 400k houses in Bellevue a year ago, but they were horrible, smelly, major fixer types.
    I went into one of the sub 400k houses a week or so ago, and it was pretty nice, especially compared to what you would have gotten for the same amount of money a year earlier.
    But you’re right…these may not sell so quickly either.

  31. 31
    buyStocks says:

    Mukoh, Jimmy, and Curtis,
    I heard a rumor that Microsoft was gonna buy a cryogenics company on the cheap, and then utilize the technology to deep-freeze half their workforce during the recession. Is this true?

  32. 32
    jonness says:

    The bailout will extend the duration of the pain. It’s not until 2010 when things really get interesting.

    Seattle vs. San Diego Median Price

    Option ARM Loans to hit hard in 2010

  33. 33
    jonness says:

    Sorry, the above link to the option ARM loans doesn’t work unless you right click and select “open in new window.”

    It’s nothing new, but it’s nice to look at. Interestingly, things kind of tame down during 2009 before hitting the fan.

  34. 34
    jonness says:

    OK, I’ll try this link one more time as it appears to have exceeded the maximum allowed size:

    Option ARM Loans to hit hard in 2010

  35. 35
    The Tim says:

    Sorry, Blogger has some code that prohibits other sites from directly loading their images, so that kinda conflicts with the spiffy image zoom thing on here.

  36. 36
    LUC says:

    Mukoh,

    Jimmy is correct about the hiring freezes at MS. A friend of mind has been in the hiring process for the past 2 1/2 weeks and after several interviews was told that the position was on hold.

  37. 37
    Esol Esek says:

    While denial may rule in the over 500k market, I am still seeing houses under 275-375k that arent clunkers sell quickly, even in places like skyway, tukwila, shoreline, and burien. These areas were 100k cheaper 5-7 years ago. A fixer selling for 300k in N Roosevelt went in 48 hours.
    While there may be a lot of inventory at the top end, I think we are still looking at lots of in-migration from other burnt-out cities, I’m just not seeing prices go back to where they were in the last real downturn around here 2002-2003. Depending how real this downturn is, we’ll see if the decline snowballs or just flatlines. Local incomes have to deotnate more for this to get worse. Of course, AltA foreclosures are just getting started.

  38. 38
    The Tim says:

    Update: As of the September data, Seattle has now dropped 10.1% from the peak. So unless we see an increase in the CS HPI between now and the January data, it looks like the 16 people that voted for <10% have already lost.

  39. 39
    matthew says:

    jonness,

    Many of those option ARMs are actually going to reset sooner than originally anticipated based on many borrowers paying minimal amounts on their loans. I read that April 2009 we will start seeing a significant impact from Option ARMs.

    And yes, Seattle has a high share of Option ARM loans.

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