Case-Shiller Tiers: Low Tier -10% in 1 Year, 33% Off Peak

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: < $251,305 (down 4.5%)
  • Mid Tier: $251,305 – $394,473
  • Hi Tier: > $394,473 (down 2.5%)

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

Case-Shiller Tiered Index - Seattle

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

Case-Shiller Tiered Index - Seattle

All three tiers are now posting new post-peak lows. The low tier has “rewound” to June 2004, the middle tier is back to November 2004, and the high tier is at January 2005 pricing.

In somewhat of a reversal from recent months, the high tier lost the most ground in December. The low tier dropped 1.8%, the middle tier fell 1.5%, and the high tier lost 2.5%.

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

Case-Shiller HPI - YOY Change in Seattle Tiers

All three tiers continued to increase their rate of decline in December. The spread between the three is increasing in recent months, which is somewhat interesting. The low tier passed into double-digit losses in December.

Here’s where the tiers sit YOY as of December – Low: -10.7%, Med: -8.2%, Hi: -4.2%.

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 lows for everybody. Current standing is 33.3% off peak for the low tier (a full third!), 28.9% off peak for the middle tier, and 26.3% off peak for the high tier.

(Home Price Indices, Standard & Poor’s, 02.22.2011)

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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.

20 comments:

  1. 1
    TheHulk says:

    I would like to call this the high-tier finally buckles under the pressure. The govt tried and oh my gosh they tried really really hard. Purchased Fannie and Freddie, drove the interest rates to near zero and just because that wasn’t enough, came up with a tax credit *twice*. The high tier is the one that had the capacity to hold out the most since presumably they have more money in the bank, and I am sure the stock market rally over the past year has helped a lot.

    But, finally they realize housing is not coming back. Not for another 10 years if you are lucky. All the artificial support and other shenanigans of the past 2 years have failed. Guess what, if we had reached this phase sooner, we would have had a real recovery in the works.

  2. 2
    ray pepper says:

    The YOY change in Seattle tiers resembles my favorite ride at Santa Cruz. The Giant Dipper: http://www.youtube.com/watch?v=rIpgTVM-aVg

    The long dark passage way at the beginning..The run up from the 2003 to 2006.. Complete with all the screaming on the way down. Kind of like what I hear now from all the sellers/builders.

  3. 3
    Scotsman says:

    I’m pretty sure it’s just the weather. 2010 was unusually cool and wet, starting in the spring and continuing through summer and fall. Remember December’s big freeze early on? And it hasn’t improved- we’re got 6″ of snow on the ground out here in Fall City right now with more on the way. It’s like Flint, Michigan out here- and you know what the real estate market is like back there! This will all turn around by spring- of 2015.

  4. 4
    EconE says:

    RE: Scotsman @ 3

    I’d put my money on Flint before Seattle.

    If/when manufacturing finds it’s way back to the U.S. do you think they’re going to build factories in the northwest where the land is *special*, or in the midwest where it’s cheap?

  5. 5

    By EconE @ 4:

    RE: Scotsman @ 3

    I’d put my money on Flint before Seattle.

    If/when manufacturing finds it’s way back to the U.S. do you think they’re going to build factories in the northwest where the land is *special*, or in the midwest where it’s cheap?

    Probably Mississippi and Alabama before either Flint or Seattle. Toyota and Hyundai already have plants there, and workers who don’t mind mind being chained to the machines for long hours.

  6. 6
    softwarengineer says:

    RE: Ira Sacharoff @ 5

    The RE is Cheap Down South Too

    So the realtors will likely have jobs, but if all we get is lower paid non-union blue collar assembly sweat shops down there….no jobs for much of the bubbleheads, the foreign corporate headquarters in their motherlands hog all the college professional jobs that us bubbleheads would be applying for.

    The bubblehead college professionals better learn to shovel snow in the PNW or hope Flint MI gets the jobs with college educated engineers, techs and business majors attached too. LOL

  7. 7
    softwarengineer says:

    RE: EconE @ 4

    Exactly

    I’d add too, where will the supply trucks find room on our clogged PNW road systems to deliver parts on time? When we overbuilt Microsoft in cramped Seattle, we kissed much of Boeing good-bye due to that traffic anomaly, IMO.

    Another problem….where will the new factory managers and professionals live? Two families to a cramped 1920 $500K 3 bdm with 1 1/2 baths? Or have them buy a $300K 2 bdrm condo to raise their families that are sitting in bankruptcy limbo? I won’t even ask where they park their cars? LOL

  8. 8
    softwarengineer says:

    RE: TheHulk @ 1

    Exactly

    I’d add too, that much of Seattle’s unemployment [in line with the rest of the country] wasn’t aided due to this irresponsible spending too…it just went for bad bankster investments, no new industries with R & D and a possible job future came out of it. The rich will clamp down on spending too when [not if] the stock market collapses again….stagflation oil prices could very well be the stock market’s near-term coffin too.

    http://finance.yahoo.com/news/Higher-oil-prices-would-apf-3098579379.html?x=0&sec=topStories&pos=1&asset=&ccode=

  9. 9
    EconE says:

    RE: Ira Sacharoff @ 5

    Probably 90% of the country before Seattle. With the other 10% being New England, NYC and So Cal. Not sure why people in the RE community brag about how high the wages are there. All that does is deter companies from wanting to move there.

    Imagine what a booming city Seattle could be if instead of bragging how expensive it is you could brag about how affordable it is.

  10. 10
    Jonness says:

    Now that the tax credit is ancient history, it’s a great time to look back at deejayoh’s excellent chart of the Japanese vs. the U.S housing bubble. It would be interesting to see an updated version of this chart with the tax credit periods identified.

    https://seattlebubble.com/blog/wp-content/uploads/2008/11/image002.png

  11. 11
    EconE says:

    What’s better for a realtor. Selling a $300,000 house once every 10 years for a client or selling a $150,000 house once every 3 years?

    If houses were $150,000 instead of $300,000, perhaps there would be far more turnover hence more income for Realtors?

    Wouldn’t people be more prone to move around more and try different areas in the city if it was cheaper?

    6%*$300,000=$18,000 once a decade.

    (6%*$150,000)*3=$27,000 every 9 years.

    Makes sense to me.

  12. 12
    Mike says:

    RE: TheHulk @ 1

    Totally agree that the most interesting thing out of this month’s data is the fall in the top tier. There has to come a point where people looking at Mathew’s Beach decide Lake Forest Park is cheap enough that it doesn’t make sense not to live farther out, then somone looking at Wedgewood makes the same decision to give up sidewalks and buy in Mathew’s Beach, then someone looking at Laurelhurst decide that prices in Wedgewood have come down so far that they can’t justify the price spread to have access to a beach club they won’t use more than twice a year. Apply the same dynamic to whatever other string of neighborhoods you want, but eventually the ripple of sub-prime foreclosures will impact even the neighborhoods where there aren’t a lot of short-sales. No matter how much “better” one neighborhood is, at some point there is only so much more people are going to be willing to pay for the higher tier areas. The idea that there were any areas that are “safe” or “insulated” is right up there in terms of real estate marking bull.

  13. 13
    David Losh says:

    I’m glad to see the Seattle Bubble branding on your graphs, and hope you keep the branding when they are trasferred to redfin.

  14. 14
    Herman says:

    By EconE @ 11:

    What’s better for a realtor. Selling a $300,000 house once every 10 years for a client or selling a $150,000 house once every 3 years?

    Yeah but that’s THREE TIMES the work. It takes many minutes to key those listings into the MLS. And do you know how many calendars they have to send out to land one sale?

  15. 15
    EconE says:

    By Herman @ 14:

    By EconE @ 11:

    What’s better for a realtor. Selling a $300,000 house once every 10 years for a client or selling a $150,000 house once every 3 years?

    Yeah but that’s THREE TIMES the work. It takes many minutes to key those listings into the MLS. And do you know how many calendars they have to send out to land one sale?

    No doubt. Minutes and minutes more work. The horror!

  16. 16

    By EconE @ 11:

    What’s better for a realtor. Selling a $300,000 house once every 10 years for a client or selling a $150,000 house once every 3 years?

    If houses were $150,000 instead of $300,000, perhaps there would be far more turnover hence more income for Realtors?

    Wouldn’t people be more prone to move around more and try different areas in the city if it was cheaper?

    6%*$300,000=$18,000 once a decade.

    (6%*$150,000)*3=$27,000 every 9 years.

    Makes sense to me.

    I’d like it if home prices became more affordable. I’ve always though that falling home prices were a good thing, for both buyers and agents. But only agents who are acting as dual agents representing both seller and buyer get that six percent, normally it’s split in half, and then another chunk goes to the agent’s brokerage.

  17. 17
    EconE says:

    RE: Ira Sacharoff @ 16

    The agent(s) still make more money with my lower price example.

  18. 18

    By EconE @ 17:

    RE: Ira Sacharoff @ 16

    The agent(s) still make more money with my lower price example.

    Completely agree. The way to make houses more affordable is to have them be cheaper, not with tax credits or low interest rates or loose lending standards.
    Obviously, I don’t think home ownership is a bad thing. What’s bad is people being cajoled into buying houses they can’t afford, people being offered houses with little or nothing own, lenders telling them “Sure, no problem, you’ve got a pulse, you’re good for a 400,000 dollar loan”.
    I know: People are responsible for making their own decisions, but when people are told a lie often enough they start to believe it.

  19. 19
    Cheap South says:

    RE: EconE @ 9

    Well, I live in a very affordable state, and nobody is moving here (companies or people). I participated in a bipartisan Renewable Energy forum last Saturday, and one of the best quotes was “folks, this might be the Sunshine State, but you live in the dark ages”. And that was the Republican speaking!!! Only hours before, the governor had killed the rail project. No one in the business community was happy about that.

  20. 20
    Michael B says:

    Does this make sense?
    1. The average home price should be 3 x the average annual wage. $65K x 3 = $195.
    2. The average home price in Seattle is $350K
    3. Wages are dropping.
    4. Two million homes in shadow inventory. Many of those must be in Seattle.
    5. The longer they sit, the lower their value. Banks must move them, eventually.
    6. Fannie Mae and Freddie Mac and being shut down.
    7. Lending standards are tightening
    8. Interest rates are going up.
    9. 30% of Seattle homes underwater
    10. A 20% drop puts 50% of homes underwater.
    11. Unemployment will remain very high for the next ten years unless we add 400k new jobs per month.
    12. Americans are still highly leveraged, Seattle is no exception.
    13. Whenever the market improves or stabilises – homes will flood onto the market from banks or pent up supply. The likelyhood of panic selling at some point is high.

    Prediction: Home prices will continue to drop until the average worker can afford the average home or the average price of the average home is 15 times the rent. This means another 25% to 30% drop in real estate prices in Seattle. The only question is whether it will happen over the next 3, 5, or 10 years.

    Please help me understand where my above assumptions are wrong.

    Thanks!

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