Case-Shiller Tiers: Low Tier Still Flatlining

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.

Note that the tiers are determined by sale volume. In other words, 1/3 of all sales fall into each tier. For more details on the tier methodologies, hit the full methodology pdf. Here are the current tier breakpoints:

  • Low Tier: < $266,240
  • Mid Tier: $266,240 – $398,051
  • Hi Tier: > $398,051

The breakpoints for the tiers fell again in December, declining over 1%.

First up is the straight graph of the index from January 2000 through December 2009.

Case-Shiller Tiered Index - Seattle

The low and middle tiers fell 0.4% month-to-month and the high tier dropped 0.9%. The middle and high tiers both hit a new post-peak low, while the low tier sits slightly higher than its March 2009 low.

Here’s a chart of the year-over-year change in the index from January 2003 through December 2009.

Case-Shiller HPI - YOY Change in Seattle Tiers

The year-over-year situation improved slightly again in all three tiers. Here’s where the tiers sit YOY as of October – Low: -7.6%, Med: -7.4%, Hi: -8.3%.

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

After jumping out ahead, the low tier still seems to be flatlining, but the high and middle tiers are taking clear downward turns the last two months to catch up.

(Home Price Indices, Standard & Poor’s, 02.23.2010)

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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.

12 comments:

  1. 1
    AMS says:

    “The middle and high tiers both hit a new post-peak low, while the low tier sits slightly higher than its March 2009 low.”

    It should be noted that the low tier is supported the most by the income tax credit, at least in percentage terms. It should be no surprise that $80k homes with $8k credits have more price support than $500k homes with $8k credits. I suspect that’s why the Vegas market’s 25th percentile asking price is around $90k. Given the $8k tax credit, the home nets out to $82k, plus all the other standard expenses. Even if you think prices are going to go down by another 10%, the $8k tax credit would cover most of the housing price reduction.

    A 10% reduction on $500k less $8k is a net loss of $42k. As we know there are plenty of people who expect prices to increase in the next year.

  2. 2

    To Quote You Tim

    “…Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties…”

    Your statement brings up a plethora of data adequacy questions:

    How many repeat sales [2 or like 10?]?
    Do repeat sales mean relisting?

    It reminds me of an eBay auction with a minimum bid that nobody but suckers would bid on, so it goes through endless repeat sales until the seller gives up or drastically reduces the price?

  3. 3
    The Tim says:

    By softwarengineer @ 2:

    How many repeat sales [2 or like 10?]?

    You can download a spreadsheet that shows the total number of sale pairs each month from the link provided at the bottom of the post. Here’s all of 2009:

    • Jan: 1,678
    • Feb: 1,588
    • Mar: 1,654
    • Apr: 1,975
    • May: 2,318
    • Jun: 2,818
    • Jul: 3,295
    • Aug: 3,595
    • Sep: 3,492
    • Oct: 3,394
    • Nov: 3,303
    • Dec: 3,090

    Do repeat sales mean relisting?

    You should read the methodology I linked in the post. Repeat sales means two sales of the same property. It has nothing to do with how many times a property was listed.

  4. 4

    Thanks for the Leg Up Tim

    It’s easy to miss a critical link sometimes.

    Link article in part:

    “….Price Anomalies. If there is a large change in the prices of a sales pair relative to the
    statistical distribution of all price changes in the area, then it is possible that the home
    was remodeled, rebuilt or neglected in some manner during the period from the first sale
    to the second sale. Or, if there were no physical changes to the property, there may have
    been a recording error in one of the sale prices, or an excessive price change caused by
    idiosyncratic, non-market factors. Since the indices seek to measure homes of constant
    quality, the methodology will apply smaller weights to homes that appear to have
    changed in quality or sales that are otherwise not representative of market price trends….”

    The last sentence above is a “whopper” to me, as it definitely allows data point elimination on sales prices to be scrubbed, especially low ball prices IMO. It reminds me of the DOW stock indicator, when companies become basket cases, like GM, they’re just removed from the DOW.

    That’s why hiring your own property assessor, after you buy a home, to drastically lower property taxes works effectively in court. You can include the sweetheart deals and low priced units the realtors and savvy investors scooped up at anomaly prices…LOL…the judge has to nod their head yes, because a sale is a sale.

    Same with my recent repression car purchase….when I got 60% off the base [excluding new car dealer prep costs too] on a two year old 20K car, I bet my unit was called an anomaly too.

  5. 5

    Clever headline, Tim, but just a bit misleading. And I admire you for it, as someone out there needs to counter the misleading BS from the mainstream media.
    But when most people see the word “flatlining” they think of the medical terminology meaning dying or dead. ” He’s flatlining, Doctor, shall I inject him with 60cc of nambutol?”
    You are not suggesting that the low tier is dead, are ya?
    It’s not a healthy patient for sure, and who knows what might happen if it got taken off the respirator, but still..

  6. 6
    The Tim says:

    RE: Ira Sacharoff @ 5 – Actually I hadn’t even thought of that meaning. I just looked at the decline from peak graph, noticed how the low tier has been bouncing along at 74%-75% of the peak value for 10 months, and thought “flatlining” was a good term for that.

  7. 7
    LA Relo says:

    That respirator has been the gov’t: foreclosure moratoria, tax credits, bailouts, down payment assistance, artificially low rates, all of which are going bye bye.

    During the bubble pundits looked at median price, and median pp square foot, both of which made gains in housing look bigger than the CSI. Conversely the CSI makes the declines look less than the other two, which is IMO why the media now follows the CSI.

    Tim – are these the seasonally adjusted CSI numbers or non?

  8. 8

    By LA Relo @ 7:

    During the bubble pundits looked at median price, and median pp square foot, both of which made gains in housing look bigger than the CSI. Conversely the CSI makes the declines look less than the other two, which is IMO why the media now follows the CSI.

    The media follows both, and others too. Anytime something comes out they do an article on it and spin it one way or another.

    I’m not sure why you think the CS makes the declines look like less than the median declines. The decline from peak for CS and King County median is very highly correlated, and the difference has only been greater than 3% (e.g. one being 20% off peak and the other being 23% off peak) once in the past 12 months, and that was in June when CS showed more of a decline. 6 of the past 12 months CS was lower, which means that 6 of the past 12 months the NWMLS median was lower. 8 of the past 12 months the difference was less than 2%.

  9. 9
    WestSeattleDave says:

    By Ira Sacharoff @ 5:

    ” He’s flatlining, Doctor, shall I inject him with 60cc of nambutol?”

    Ira…nice analogy! However, administering nembutal will definately make that flat line flatter!

  10. 10
    The Tim says:

    By LA Relo @ 7:

    Tim – are these the seasonally adjusted CSI numbers or non?

    Non. I prefer to stick with the straight data from Case-Shiller, since there does not really appear to be a very strong seasonal component to their index for Seattle.

  11. 11

    RE: WestSeattleDave @ 9
    Well, if he didn’t have insurance, nambutol would be the way to go. Obviously I don’t know my medicine.

  12. 12
    AMS says:

    RE: softwarengineer @ 4 – Please come up with a better methodology, and be sure that you can explain it carefully.

    Basically if the majority of homes went up 1% and a few went up significantly more, those few are eliminated. Similar for the few sales that went down in value drastically. Determining the exact values to eliminate is the issue.

    Same with my recent repression car purchase….when I got 60% off the base [excluding new car dealer prep costs too] on a two year old 20K car, I bet my unit was called an anomaly too.

    What is this Cheech and Chong?

    http://is.gd/97bPL

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