Case-Shiller Tiers: Low Tier Falling Nearly 10% YOY

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: < $256,396 (down 1.3%)
  • Mid Tier: $256,396 – $400,191
  • Hi Tier: > $400,191 (down 0.6%)

First up is the straight graph of the index from January 2000 through November 2010.

Case-Shiller Tiered Index - Seattle

Here’s a zoom-in, showing just the last year:

Case-Shiller Tiered Index - Seattle

The low tier gave up its fastest-falling title to the middle tier this month, but both the low and middle tier hit new post-peak lows. The low tier has now given up seven percent just since the last month of the tax credit.

There wasn’t a huge variation between the MOM drops in the tiers this month. The low tier dropped 0.7%, the middle tier fell 1.4%, and the high tier lost 0.9%.

Here’s a chart of the year-over-year change in the index from January 2003 through November 2010.

Case-Shiller HPI - YOY Change in Seattle Tiers

All three tiers continued to fall faster in November. The low tier is rapidly approaching double-digit losses again. Here’s where the tiers sit YOY as of November – Low: -9.4%, Med: -7.2%, Hi: -2.6%.

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

New low points again for the low and middle tier. The high tier still sits slightly above its February low. Current standing is 32.1% off peak for the low tier, 27.8% off peak for the middle tier, and 24.4% off peak for the high tier.

(Home Price Indices, Standard & Poor’s, 01.25.2011)

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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.

34 comments:

  1. 1
    Yakima_Hick says:

    Yeah right… Check out sales for the Month of December Nationally.. The Commerce Department said Wednesday sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November.

    Economists, who had expected new home sales rise to a 300,000-unit pace last month, took the fairly upbeat report as a tentative sign of a turnaround in the troubled housing market. http://www.cnbc.com/id/41272651 BOOYAH!!!! Bubbleheads.. Run for cover now y’all!!

  2. 2

    RE: Yakima_Hick @ 1 – As I said on another thread, that is new home sales data, so I wouldn’t read too much into it for reasons I won’t explain again. Also, I wouldn’t read too much into any single month.

    That said, interesting to note that the data is consistent with the NWMLS December sales volume data for King county (which I also wouldn’t read too much into because it’s only one month), but for this data short sales and REOs seemingly wouldn’t be a part of it at all.

  3. 3
    Scotsman says:

    RE: Yakima_Hick @ 1

    That’s great- but we’re talking about prices, not sales volume. And the lower prices fall, the more people will be able/willing to buy.

    Just walk away from that sucka. Booyah.

  4. 4
    Shoe Guy says:

    RE: Yakima_Hick @ 1 – Dead Cat Bounce.

    In other news, Mortgage Applications tumble double digits in January.

    Wait, maybe it is the same news…

    http://www.zerohedge.com/article/mortgage-applications-tumble-double-digits-refinance-index-hits-lowest-january-2010

  5. 5
    Yakima_Hick says:

    RE: Scotsman @ 3 – Prices fall? Wrong sucka!! Here are the facts.The median sales price for a new home increased 12.1 percent last month from November to $241,500, the highest since April 2008.

    Compared with December last year, the median price rose 8.5 percent, the biggest increase since August.

  6. 6
    The Tim says:

    RE: Yakima_Hick @ 5 – Wow, the nationwide median price of new homes really has a lot to do with the price of homes re-selling in the Seattle area. Not.

    Stay on topic or I will move/delete your comments, since you’re obviously just trying to troll.

  7. 7

    I’ve asked for this type of information in the past, so I thought I’d look it up.

    Last year the cutoff for the low tier was about 14k higher, and the high tier about 2k higher. Now I just have to think about what that means! ;-)

  8. 8
    Shoe Guy says:

    Let him be, Tim. He probably bought his house in 2008…

  9. 9
    Greg says:

    Interesting analysis as always, thanks.

    My wife and I are counting on a drop in the mid-upper tier here in suburban Portland in the next 6-9 months, and I find it fascinating. There are many factors to consider within each tier. I haven’t done any quantitative analysis but here are the subjective, qualitative factors that I’m seeing in the mid/upper ($350k+ range):

    Factors contributing towards larger price drops:
    Outer suburbs
    Newer construction
    More square footage
    Higher initial asking price (the farther above the jumbo loan limit, the greater likelihood of a significant drop)
    Examples – Happy Valley, West Linn, Tualatin

    Factors contributing towards greater price stability:
    Older, more established communities (inner suburbs and within PDX proper)
    Elementary school districts with a high percentage of Asian students
    Examples – West Hills, Lake Oswego, 97229 Zip Code

    I am particularly fascinated by what is happening in Lake Oswego and West Linn (upscale suburbs – Lake O is directly south of Portland, and West Linn is directly south of Lake O). A few years ago they had nearly identical house prices, and now it feels like West Linn is dropping twice as fast as Lake Oswego.

  10. 10
    Cheap South says:

    RE: Greg @ 9

    I was about to ask if anyone knew where I could find some basic market numbers (median price, price change, etc) on Portland.

  11. 11
    Shoe Guy says:

    RE: Cheap South @ 10http://portlandhousing.blogspot.com/

    I’m down in the Portland area, so I keep track of the Portland and Seattle house blogs, as Portland tends to follow Seattle trends as far as price goes.

    I’m with you, Greg, although as a first time home buyer I’m on a slightly lower tier. People here in Portland still think they can get $200,000 to $225,000 for an un-updated rambler in the suburbs built in the 1970s, but that attitude is going to come to a screeching halt in 2011 as those Option Arms taken out in 2006 reset this year.

    Prices here should come down across the board because of it.

  12. 12
    deejayoh says:

    By Shoe Guy @ 4:

    RE: Yakima_Hick @ 1 – Dead Cat Bounce.

    In other news, Mortgage Applications tumble double digits in January.

    Wait, maybe it is the same news…

    http://www.zerohedge.com/article/mortgage-applications-tumble-double-digits-refinance-index-hits-lowest-january-2010

    Vast majority of mortgage apps right now are refinancing. Rates tick up, volume drops. Not really reflective of housing demand at all. As a matter of fact, the article you posted refers pretty much only to refinancing

  13. 13

    Given that the price/rent ratio is lower in the low tier, and that prices in the low tier have fallen nearly 10% in the low tier YOY, I’d be curious to know what the current price differential is between the rent and a mortgage payment on a Seattle area low tier home. I’m guessing there would still be a gap of a couple of hundred per month. You can buy a livable but not very nice 2 bedroom 1 bath home in Skyway for 160,000. Maybe you could rent it for 850?
    Quite different than buying a 700,000 dollar house, which maybe you could rent for 2500?

  14. 14
    TheHulk says:

    A classic Shakespeare quote in the days of bubble economics… To default or not to default that is the question.

    http://money.blogs.time.com/2011/01/26/to-default-or-not-to-default/

    I now know 3 people who have strategically defaulted in the Puget Sound. The guy who got his house in 2005 was able to negotiate a short sale. The guys who got their places in 2006 and 2007 respectively have been living rent-free for almost a year now. This is additional “shadow inventory” that never shows up when we look at listings online. As prices drop further, I only expect this problem to get worse.

  15. 15
    Mike says:

    As Tim does a good job of noting at the begining of the post, the data is for the three county region. Would be very interesting to see how the tiers break out within those three counties and I would not be surprised if the three tiers were pretty closely corelated to the counties. Or another way to put it, are even 10% of sales in the Seattle city limits in the lower and middle tiers? The high-tier doesn’t drop as much because it is the urban areas where new construction is limited and incomes are high and the other two tiers take a beating because they’re really tracking a totally different market.

    It always strikes me as somewhat misleading that Case-Shiller uses the “Seattle” label for what really should be “that several hundred square mile place where over half of Washington State lives”

  16. 16
    Daniel says:

    By Kary L. Krismer @ 7:

    I’ve asked for this type of information in the past, so I thought I’d look it up.

    Last year the cutoff for the low tier was about 14k higher, and the high tier about 2k higher. Now I just have to think about what that means! ;-)

    I don’t think this information can be transformed into a simple insight =).

    As you may know a median is more generally defined as each element in a set that minimizes the sum of distances from said point to all points in the ensemble. (The simple definition of the middle element in a list ordered by magnitude is a special case, but this description breaks down in a higher dimension.) Notice that a median with this definition is not unique but it can be made unique.

    Going back to the low-dimensional case, one can define k-iles (The tier boundaries are 3-iles or “tertiles”) that follow from a similar minimization procedure with different weights assigned if a value is lower or higher. Just like a median is a sort of mean these k-iles are means, more precisely also called “positional means”.

    One simple property of these k-iles is that if you shift each point by the same amount, each k-ile will shift by that amount.

    More general positional means are simulvariant to all continuous monotone increasing functions. To explain what that means would take some time and some plots =)

  17. 17
    m-s says:

    RE: I’ve asked for this type of information in the past, so I thought I’d look it up.

    Last year the cutoff for the low tier was about 14k higher, and the high tier about 2k higher. Now I just have to think about what that means! ;-)

    With apologies to Daniel,
    Umm, I think it means the houses that re-sold this year are cheaper than those that re-sold last year….

  18. 18
    Trigger says:

    How come mid tier is:
    Mid Tier: $256,396 – $400,191

    Can you even get a house with 1 room for less than 300K? Where? Maybe this refers to Sequim or sthg like that.

  19. 19
    David Losh says:

    RE: The Tim @ 6

    His numbers are wrong, but his point is valid. New construction was at something like 534,000 new housing units which may or may not include condos. I don’t know, but was drawn to the point he is making.

    Prices did go up for these new housing units. People did buy them. Here, in our South Everett area there were multiple offers. Some people got on waiting lists.

    Here’s my theory: Builders panicked and slashed prices. The price of lots dropped like a rock and some builders did lot price averaging so they could build, and unload over priced dirt. The prices, compared to the way over inflated prices of 2007, 2008, looked like a bargain. Some houses sold for $80K less then the same model a few parcels down, and they were new.

    The sales pitch is that because of the lack of building permits the supply of new homes will be in pace with demand, or below, for years to come.

    New construction is what some buyers have to have. There is a market for those housing units that a little thing like declining prices won’t deter.

  20. 20
    The Tim says:

    By Trigger @ 18:

    How come mid tier is:
    Mid Tier: $256,396 – $400,191

    Can you even get a house with 1 room for less than 300K? Where? Maybe this refers to Sequim or sthg like that.

    I’m seeing plenty of sales even in King County with prices under $250,000 and at least 2 bedrooms. A sold homes search on Redfin shows 786 sales matching those criteria in the last three months.

  21. 21
    Daniel says:

    By m-s @ 17:

    With apologies to Daniel,
    Umm, I think it means the houses that re-sold this year are cheaper than those that re-sold last year….

    No apology needed. I guess I should always be terribly precise and say “no simple additional insight” as your insight already follows from the CS index itself =)

    As an example of a non-trivial insight one could mention that the CS high tier has the strongest correlation with the index, as the sales are value weighted, so the high tier counts more in the total index.

  22. 22
    Gary says:

    Numbers are numbers, facts are facts and charts show lines. This is all numbers that go up or down; so what? The interesting thing to me is predicting what is/will happening in the United States generally and specifically in Seattle market that effects these numbers predicting a future trend. I believe ultimately income and available disposable income will determine the outcome for housing prices. iMHO, income levels are going down and eroded continueously by new ways for government debase the currency and to tax and new ways to spend on luxury items. Of course, nots forget wall street losing you 401K money either. That said, until you see substantial levels of hiring, people getting promotions and more disposable income; prices of housing will continue down to the year 2000 level approaching the 100 year price averages. It won’t be jobs as barista’s at Starbucks and greeters at Walmart that saves us either.

  23. 23
    me says:

    Way to go yet… I recentlys started looking into Las Vegas Real Estate (based on the idea of living, well, somewhere else and working remotely). Eye-opening. Money that barely buys you a really ugly condo here buys you a 5br house with high ceiling right next to a park there. Seriously attractive. Also, less rain.

  24. 24
    Jonness says:

    By Yakima_Hick @ 1:

    Economists, who had expected new home sales rise to a 300,000-unit pace last month, took the fairly upbeat report as a tentative sign of a turnaround in the troubled housing market. http://www.cnbc.com/id/41272651 BOOYAH!!!! Bubbleheads.. Run for cover now y’all!!

    In other words, you are underwater on your house.

    I’d love to stick around and listen to you try to pretend otherwise, but I have to go check my stocks to see how much free money I made today. This is getting too darned easy!

  25. 25
    Jonness says:

    RE: @ – I’m back! Everything in my portfolio shot to the moon today. Bernanke = Santa Clause. FHA home loans = The Devil.

  26. 26
    Partial View says:

    By The Tim @ 20:

    A sold homes search on Redfin shows 786 sales matching those criteria in the last three months.

    I’d be very curious to know what percentage of those were bought by a potential resident, not a developer/investor. A lot of the listings look so far off the market standard that I have to expect that they’re teardowns. Example, a 3 bedroom in Greenlake going for 90k, with every nearby house valued at 3 to 5 times as much on Zillow.

  27. 27
    Scotsman says:

    RE: Jonness @ 24

    “In other words, you are underwater on your house.”

    My money says he has a rental too- and is Pfft’s cousin.

  28. 28
    BillE says:

    By me @ 23:

    Way to go yet… I recentlys started looking into Las Vegas Real Estate (based on the idea of living, well, somewhere else and working remotely). Eye-opening. Money that barely buys you a really ugly condo here buys you a 5br house with high ceiling right next to a park there. Seriously attractive. Also, less rain.

    When I think next to a park here, I think graffiti on the fence.

  29. 29
    BillE says:

    By Trigger @ 18:

    How come mid tier is:
    Mid Tier: $256,396 � $400,191

    Can you even get a house with 1 room for less than 300K? Where? Maybe this refers to Sequim or sthg like that.

    It’s for King, Pierce, and Snohomish Counties. Lots of houses for under $300k in Pierce and Snohomish.

  30. 30
    MacroInvestor says:

    Where are you now, Pfft? Come back and troll with us now.

  31. 31
    ray pepper says:

    RE: TheHulk @ 14

    Hulk, I know so many people now living for free it seems like a “grass movement” of common sense. Most have not paid for 2+ years and remain in the Loan Modification abyss.

    I want to point out what happened last week at the Pierce County Trustee Sale. As my property I was interested got postponed from 10am to 2pm then to 3pm I was forced to wait with about 10 other investors. At about 210pm a crowd of about 30 people exited the Court House. I began to watch all the yelling and wandered over kind of cranky that I have wasted an entire day on one property. As I approached it turned out to be 3 Attorney’s and followers of the “Produce the Note” campaign that has swept America. I began to talk with them and all have not paid on their Mortgage for years and some have already lost their home but refuse to leave. Fascinating hearing the Attorneys who are at a phone calls notice when sheriffs arrive to Evict. They jump into action and STOPPED the eviction based on many factors. This happened over and over and as one lady stated it happened to her the day before this Courthouse appearance and she sent the Sheriff “on his merry way.” ‘

    One thing they all have in common is the belief they will eventually get their home “free and clear” and that the injustices done to them and millions of Americans must stop. It was very interesting to observe this and realize again just how much worse things will get in housing. I will say it again. They are all coming back………..Not a matter of if….just when…

  32. 32
    SG says:

    RE: The Tim @ 6 – Hey Tim, double standards much? When everyone was screaming Seattle would be isolated from the crash, you were claiming that Seattle cannot escape national trends (I agree with you). But now, real estate is suddenly “local”? And threatening to remove comments that don’t agree with your opinion – those are just first signs of someone not able to defend their position with data. We all know Nov was bad and things appeared to have changed in Dec, so I admire the ones that are at least using the one-months-data-is-not-sufficient to hedge their stance.

    Same applies for the others making personal attacks.

    Personally, I feel the reason for the low tier collapsing is that nobody really wants these homes anymore given that you can now purchase a nicer home for about the same price you had come to expect to pay for the fixer uppers during the bubble. Or at least until the people in the lower-wage tier who would buy these homes sense a stability in their jobs.

  33. 33
    Snigliastic says:

    By BillE @ 29:

    By Trigger @ 18:

    How come mid tier is:
    Mid Tier: $256,396 � $400,191

    Can you even get a house with 1 room for less than 300K? Where? Maybe this refers to Sequim or sthg like that.

    It’s for King, Pierce, and Snohomish Counties. Lots of houses for under $300k in Pierce and Snohomish.

    yes. but the houses in snohomish for 300k are crap. I’m having to look at the 500k range to get something halfway decent. it’s depressing.

  34. 34
    The Tim says:

    By SG @ 32:

    RE: The Tim @ 6 – Hey Tim, double standards much? When everyone was screaming Seattle would be isolated from the crash, you were claiming that Seattle cannot escape national trends (I agree with you). But now, real estate is suddenly “local”? And threatening to remove comments that don’t agree with your opinion – those are just first signs of someone not able to defend their position with data.

    Try reading what I actually said. This post is about the “price of homes re-selling in the Seattle area.” When a post comes up about national trends, we can talk about national numbers there. Or anyone who wants to can start a conversation about national trends in the open thread. The commenter that I “threatened” was posting on a subject that was 100% off-topic for the post in a way that was clearly a deliberate attempt to provoke other commenters.

    Being off-topic and a troll are what get comments moved or deleted, not disagreeing with me. I have never and will never delete comments just because they disagree with me.

    P.S. – These rules are clearly stated in the Seattle Bubble Comment Policy that is linked directly between the comment box and the submit button on every post. If a commenter chooses to ignore the plainly-stated rules, I will choose to delete or move their comments. It’s as simple as that.

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