Case-Shiller Tiers: Prices Break Back into 2005

Let’s check out the three price tiers for the Seattle area, as measured by Case-Shiller. Remember, Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties.

First up is the straight graph of the index from January 2000 through November 2008.

Case-Shiller Tiered Index - Seattle

Price declines were sharper in November in all three tiers, with the low tier taking the largest hit—3.1% in a month. The low and middle tiers have now rewound to December 2005, and the high tier to February 2006.

Here’s a chart of the year-over-year change in the index from January 2003 through November 2008.

Case-Shiller HPI - YOY Change in Seattle Tiers

The low tier continues to hold the title for largest YOY declines. The high tier also dropped under 10% YOY for the first time in November. Here’s where the tiers sit YOY as of November – Low: -12.7%, Med: -11.2%, Hi: -10.3%.

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

All three tiers continue to drop at roughly the same rate from their respective peaks.

If price declines continue at the same speed they have averaged over the last six months, over the next year prices in Seattle will rewind back to early 2005. Of course, the chance that price declines will continue at the same speed rather than continuing to accelerate further seems somewhat unlikely at this point.

(Home Price Indices, Standard & Poor’s, 01.27.2009)

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
    Interloper says:

    Can you say, “free fall”?

  2. 2
    Hugh Dominic says:

    The latest numbers from Case-Schiller are stark. Only more so when you realize there is a several month time lag and that the slow December isn’t even factored in.

    And you can’t expect any kind of rebound with all of the layoffs we are seeing. Even people with the 20% down payment and a secure job will hold off in uncertain times.

    I think we will see a greater than normal rise in inventories in the next month as those laid off (see WaMu, MS, Starbucks, Boeing) and those who need to relocate put their houses back on the market. For those who don’t have to sell, they can wait out the next 4-5 years (or 10-15 for Sniglet).

    But for those who have to sell, I think the realization is building that prices are only going one way for a long time….

  3. 3
    patient says:

    One thing to keep in mind when comparing the declines in percentage is the dollar amount. If a home that sold for $220k at peak now sells at $200k it has dropped 10% and the loss in value is $20k, not much of a train smash and something the seller is probably not to reluctant to do. If a $1m home sells at 10% below last sale it’s a hit of $100k. A bit tougher to stomach, there’s your son’s college fund gone. High tiers are therefore hanging on to false hopes longer since it stings more to accept reality. At 5% decline the loss is still $50k which trumps the actual loss of the 10% of the low tier home.

  4. 4
    Groundhogday says:

    All of the Case-Shiller home price declines to date have occurred for the most part PRIOR to the real economic collapse (4th quarter 2008). This could get very, VERY ugly. WA could be one of the worst hit states in the country economically (housing bust, Boeing and MS all hitting the skids) which would turn Seattle into a ghost town.

  5. 5
    Groundhogday says:

    “But for those who have to sell, I think the realization is building that prices are only going one way for a long time….”

    In real (inflation adjusted) dollars, we will not likely see current prices again in our lifetimes, perhaps not for several generations until the memory of this bubble fades sufficiently and our children’s children can create their housing bubble.

  6. 6
    Hugh Dominic says:

    Patient,

    I think its all relative – 20K to somone who bought a $220K home might be just as much of a hit as $100K to someone who bought a $1M home.

    Just a thought, but the stickyness on the higher tiers is likely a factor or a.) more cash in the bank (I dont have to sell right now) and b.) there were likely a lot of people still trading up over the last 6-9 months. As that slows down, the top tier catchs up.

    Would be interesting to see an analysis of tiers in other markets.

  7. 7
    The Tim says:

    Rich Toscano has been providing similar commentary and charts of the Case-Shiller data for San Diego for quite some time. Here’s his post on November.

    Also, you can download the raw Case-Shiller data in Excel format for yourself at the link provided at the bottom of all my Case-Shiller posts.

  8. 8
    patient says:

    I hear you HD but I still think the $ amount is a factor to consider when comparing the percentage drops between the tiers. Money is money, even for the more well off.

  9. 9
    Hugh Dominic says:

    Thanks Tim.

    San Diego seems to have a very similar profile to Seattle (even more resilient top tier) although recently their top tier looks to be taking a nose dive….

  10. 10
    anony says:

    You are assuming that most people understand what is going on and will remember for generations. The majority of people who buy houses are willing to pay significantly more for a house if the sun is out, or if the fridge has a stainless steel casing.

  11. 11
    Hugh Dominic says:

    patient

    For sure the $ amount is a factor – and the well off will try to hold onto it as much as the rest.

  12. 12
    Mikal says:

    Where is anyone doing better? It will be bad for all. New York and New Jersey have lost tens of thousands of banking jobs that will never come back as they were involved in mortgage backed securities. To suggest that we will become a ghost town is ridiculous.

  13. 13
    Scotsman says:

    Looking at the top chart, the actual index values, it reminds me of an analysis I read that said all bubbles are a function more of human psychology than fundamental economic factors. As such, they tend to be very symmetrical in their growth and decline, taking as long to burst as they did to build. The nearly perfect head-and-shoulders formation at the peak in 2007 is an eerie reminder that this may take much longer to play out than we think. Bottom in 2014?

  14. 14
    The Tim says:

    You are not alone in your symmetry observation. We noticed that back in October and had an interesting discussion about it in the comments.

    Of particular note are the “mirror” charts I posted which forecast the decline based purely on the pattern of the run-up.

  15. 15
    Civil Servant says:

    Keep in mind too that those buying in the high tier are more likely — have been more likely, in my experience — to have financed these purchases in part with inheritance or parental-gift money. The people I’ve known in that situation have been much more blase about making an economically sound purchase (i.e., bring on the stainless, and make sure the house is in a neighborhood their friends will approve of) than those whose down payments have been self-earned. So maybe they will also be less bothered by a value downturn because any net loss is not “theirs”?

  16. 16
    Groundhogday says:

    It happened once before…

    “Will the last one to leave Seattle, please turn out the lights?” was a common phrase in the 1970’s. While the economy is now more diversified, WAMU, Boeing, MS, and Starbucks leave a pretty big footprint. I’m not suggesting that Seattle will be the only place hit hard, but it might well be ONE of the hardest hit cities.

    Boeing orders are down 50%, and still dropping. What happens if Boeing cuts 50% of its Seattle workforce (it has happened before), plus >50% of contractors and subcontracts? Toss in a major MS contraction and Seattle could be very badly hit. Real estate is down, forest products down, Starbucks is struggling… is ANY part of the Seattle area economy doing well?

  17. 17
    Groundhogday says:

    I noticed that you argued for some fundamentally based increase in Seattle real estate based upon job and economic growth. Have you changed your mind on that given the struggles of Boeing, MS, Starbucks, etc…?

    My unsupported hunch is that real estate was probably grossly undervalued in the late 1980’s due to the trauma of the 1970’s collapse. So much of the increase in the 1990’s might well have been a recovery of confidence and a return to fundamental valuations. A friend purchase a house in the mid-1980’s at a time when purchasing was MUCH cheaper than renting, anecdotal evidence that housing was underpriced.

  18. 18
    TheHulk says:

    Hopefully those very same people wont be able to qualify for the loan that will enable them to buy the house surrounding that “stainless steel casing” fridge :)

  19. 19
    Scotsman says:

    Interesting- thanks, Tim. I missed that at the time.

  20. 20
    Mikal says:

    Where is there a place in the country that is doing well? We at least have some industry. Much of the rest of the country has lost their industry and replaced it with construction jobs which are somewhat idle. Without American made there will soon be a third world America.

  21. 21
    The Tim says:

    I noticed that you argued for some fundamentally based increase in Seattle real estate based upon job and economic growth. Have you changed your mind on that given the struggles of Boeing, MS, Starbucks, etc…?

    Wait, what? When did I make that argument?

  22. 22
    TJ_98370 says:

    I think Groundhogday was responding to Mikal.

  23. 23
    Groundhogday says:

    Oops, scrolled too quickly through the Oct 2008 thread. Ben made that claim, not you.

  24. 24
    Groundhogday says:

    Texas, Wyoming, Montana, Utah, … just a few of the states that I’m familiar with. Not that they aren’t having problems (they are), but not of the same magnitude.

  25. 25
    Mikal says:

    Whyoming was because of the energy boom,gone. Montana was because of the building boom, gone. I have been to Texas recently ,mostly building boom, gone. I’m unsure of Utah. What according to you is keeping people employed?

  26. 26
    Groundhogday says:

    Sorry, but it isn’t that simple. Wyoming depends upon energy, state government and federal government spending. The state had such a huge surplus that they still have breathing room and the feds certainly aren’t cutting. Montana also depends upon ag, tourism, and energy–and state/federal spending. The state government is fiscally conservative so cuts will not be nearly as draconian as WA, fed money is huge (small population, two senators) and not going away. And so far Texas has weathered this better than any other major state. If you think the entire TX economy depends upon housing you are quite mistaken… it is a diverse economy. They will probably be hurt more by energy than housing.

    The bottom lines is that (1) WA state government is dependent upon highly cyclical revenues so state cuts will be amoung the most severe in the country; (2) WA economy is highly dependent upon two major, MAJOR employers: Boeing and Microsoft; and (3) WA state is just now starting to experience the home price collapse a year behind the rest of the country.

    Will we be as bad off as Orange Country, probably not. But given the lack of diversity in our economy we might be particularly hard hit. But clearly you take personal offense at this suggestion. So I’m quite willing to get back to you in 6-12 months when we have more data to evaluate our two different projections.

  27. 27
  28. 28
    Arno says:

    Here is another good view of the Case Shiller declines, and the NAR’s attempt to keep the bubble from deflating more. The NAR does NOT WANT affordable housing!
    http://www.geldpress.com/2009/01/housing-prices-continue-plunge/

  29. 29
    Esol Esek says:

    I want prices to go down and I call bullsh*t. Go to Windermere and do a condo check for downtown seattle – No deals whatsoever. QA is down my a$$. It’s still double 2000. This city is over-priced beyond belief. The Delusional are still stuck with their 800k homes but people are still buying central homes under 500k. Either people dont believe it will last or someone is bottom-trolling our market. During the dotcom bust, prices REALLY collapsed but they also were lower overall. Not seeing it yet. This market is still triple 1996.

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.