Case-Shiller Tiers: Middle & Low Tiers Still Lagging

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: < $245,591 (up 3.1%)
  • Mid Tier: $245,591 – $389,559
  • Hi Tier: > $389,559 (up 3.2%)

First up is the straight graph of the index from January 2000 through May 2012.

Case-Shiller Tiered Index - Seattle

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

Case-Shiller Tiered Index - Seattle

All three tiers have been on a solid upward trend this spring ever since the low tier bottomed out in March. Between April and May, the low tier rose 1.1% MOM, the middle tier increased 2.6%, and the high tier gained 2.7%.

Here’s a chart of the year-over-year change in the index from January 2003 through May 2012.

Case-Shiller HPI - YOY Change in Seattle Tiers

Everybody’s been heading upward fairly consistently on this one since July 2011. Here’s where the tiers sit YOY as of May – Low: -6.8%, Med: -0.9%, Hi: +1.8%.

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

Current standing is 42.4% off peak for the low tier, 32.0% off peak for the middle tier, and 24.8% off peak for the high tier. Everybody is up off the low points set earlier this year.

(Home Price Indices, Standard & Poor’s, 7.31.2012)

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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.

37 comments:

  1. 1

    There are at least two reasons for the performance of the low tier that I can think of.

    First, the push to have a larger percentage of the population become home owners meant that you had people buy houses who didn’t have the financial ability to make their payments and maintain their house. Thus many houses deteriorated. There’s no way that C-S can account for this. They have to assume the house is in the same condition, or throw the pair out. There is no in-between.

    Second, the types of houses bought in the low tier are generally functionally obsolete, such as 1 bathroom homes. With lower prices, more people can now afford 1.75+ bath homes, which reduces the demand for anything less, which in turn reduces their values.

  2. 2
    ARDELL says:

    To accurately evaluate the low tier you have to pull the “value is in the land” homes and move them over to the vacant land category. When you see a house in Federal Way on a 12,000 sf lot selling for $60,000, how close is that to land value?

    Anyone know the lowest possible price for a building lot that has all services connected? I would likely pull out any “home” sold under that price and call it vacant land.

    Homes selling at vacant land prices do skew the low tier numbers, though I personally wouldn’t automatically assume 1 bath homes are functionally obsolete. If I did I would have to go to the high tier and call homes that have 50% of the square footage represented in the formal living, room, dining room and master bedroom suite as equally functionally obsolete.

    The trend is moving away from opulent master bedrooms with closet sized children’s rooms. People still like large homes, but not when the areas they don’t use often take up 50% of that square footage.

  3. 3
    Passed Doo says:

    The chart fetish drags on and on and on and. . .

    Up next, let me guess, mmm, shamefully modified digital listing images. . .

  4. 4

    By ARDELL @ 2:

    To accurately evaluate the low tier you have to pull the “value is in the land” homes and move them over to the vacant land category. When you see a house in Federal Way on a 12,000 sf lot selling for $60,000, how close is that to land value?

    I would think C-S’s system of throwing out abnormally high and low sales would automatically do that.

  5. 5

    RE: Passed Doo @ 3 – I find this much more interesting than the initial post each month on the C-S data, like yesterday’s. Of course, since I don’t find C-S all that interesting, that could be said of almost any thread which isn’t a poll.

  6. 6

    By ARDELL @ 2:

    Homes selling at vacant land prices do skew the low tier numbers, though I personally wouldn’t automatically assume 1 bath homes are functionally obsolete.

    I don’t know why I can remember things I’ve read better than things that actually occur in real life, but somehow I can. You have called 1 bathroom homes functionally obsolete, responding to Tim’s selection of a property.

    https://seattlebubble.com/blog/2011/12/28/case-shiller-seattle-home-prices-still-falling/comment-page-1/#comment-152792

    Also, post 68 in the same thread, after Losh disagreed with you, you wrote:

    I don’t agree at all, David. But that’s OK. I think a 3 bed 1 bath house is by textbook definition, functionally obsolete. I don’t care if that home is in Redmond, or Shoreline or Green Lake.

  7. 7
    Passed Doo's Doo says:

    I love the consistency of the graphs that are posted, it helps to tell a consistent story and provide consistent metrics. There’s only so many interesting ways to look at a train wreck in slow motion. (Oh yeah, and the train wreck clean up, too.) Looking at how the same measures change is more meaningful than looking at lots of different measures.

    thanks for posting, keep it up!

  8. 8
    ARDELL says:

    RE: Kary L. Krismer @ 6

    In context, a one bedroom house in the previous thread you linked to was in Redmond where only 16 homes sold with 1 bathroom in the last 365 days. That would be less than 2% of all homes sold in that area, and so functionally obsolete “for that area”.

    Conversely if you look at Seattle, 1,188 or more homes sold with only one bath during the same period of time, and 1 bath homes represented 39% of all homes sold for $400,000 or less.

    What is and isn’t “functionally obsolete” can vary from one area to the next. Partly that has to do with the issue I was bringing up, which is when the 1 bath (or other factors) causes the home to drop down to “land value”, and causes it to be a tear down, then it is the equivalent of vacant land price. But that is not the case for all 1 bath houses where 1 bath houses still retain value well above lot value, as in 39% of the homes still sell to people who will occupy them with only 1 bathroom.

    An old fishing cabin with 1 bath may be functionally obsolete in Medina. But that same fishing cabin is not functionally obsolete along the banks of the river out in North Bend. It is not the feature, out of context, that creates the conclusion.

  9. 9

    RE: ARDELL @ 8 – Which of course is why you mentioned Shoreline in your post that I quoted. /sarc

    In any case, I’m not saying functionally obsolete houses don’t sell. So looking at the number of one bathroom homes that sold in Seattle is somewhat irrelevant.

    If you want to do that though, look at 1 bathroom homes in Seattle built after 1990. There were only two sales of such properties in the past six months, excluding townhouses and houseboats, because such properties are functionally obsolete. They don’t tend to get built because not enough people want them.

  10. 10

    By Kary L. Krismer @ 9:

    RE: ARDELL @ 8 – Which of course is why you mentioned Shoreline in your post that I quoted. /sarc

    In any case, I’m not saying functionally obsolete houses don’t sell. So looking at the number of one bathroom homes that sold in Seattle is somewhat irrelevant.

    If you want to do that though, look at 1 bathroom homes in Seattle built after 1990. There were only two sales of such properties in the past six months, excluding townhouses and houseboats, because such properties are functionally obsolete. They don’t tend to get built because not enough people want them.

    Sort of. Most people aren’t deliberately seeking out 1 bathroom homes. They’ll find them because they’re either seeking out inexpensive homes, or because they’re seeking out older homes. Many people in Seattle people think it’s much preferable to find a 1920’s charming Craftsman in Wallingford with 1 bathroom than to find something newer with more than 1 bath.

  11. 11
    ARDELL says:

    RE: Kary L. Krismer @ 9

    The same logic applies in your 1990+ example. In Seattle homes (not townhomes since Redmond does not call townhomes single family) built in 1990 and later only represented 14% of all homes sold during the same period discussed above. Conversely in Redmond, homes built in 1990+ represented 59% of all homes sold during the same period.

    Whether or not 1990+ built is a factor that would determine functional obsolescence is different from one area to the next. Home is older than 1990 is not considered a considerable weakness in Seattle where 86% of the homes sold are older than 1990. Not necessarily the same for Redmond where only 40% of the homes sold are older than 1990.

    There is no universal truth to what makes a home functionally obsolete, as that changes from one area to the next, and is subject to buyer trends as well. More and more I am seeing homes with monstrous master suites and huge formal areas becoming less popular in favor of homes better suited to all members of the family on an every day basis.

    Smaller and more practical is the new black.

  12. 12
    ARDELL says:

    sorry…wrong thread.

  13. 13

    RE: Ira Sacharoff @ 10 – I would agree that could be a good trade off for many people (1 bathroom for 1920s style house). I probably wouldn’t have agreed back when I had a teenage daughter. ;-)

  14. 14
    corndogs says:

    The lower tier includes the least desirable properties. You guys can speculate how many bdrms they have but it’s not the reason for the poor performance.

    Home-ownership has been decreasing since 2004. There is a smaller pool of potential “home” buyers now than there was in the past. At the same time, falling prices and interest rates provide these buyers with much larger checkbooks (effectively) than they’ve had in a very long time, when it comes to buying a house. So the undesirable houses are essentially leftovers that no one wants, that’s where your investors come in. They’ll make the undesirable, desirable again and sell to someone like “The Tim” for big bucks. Or rent it for the next 20 years to Dave Losh as he sets in braced for the Armageddon.

    It’s very similar to the situation of matchmaking in the US. There are more women than men in this country. Therefore, the least desirable women do not get a man. These women are generally not attractive or intelligent ….. Now to take up the slack, there are certain guys who will sleep with more than one of these women, maybe even a dozen of them. These guys provide a service… much like the real estate investors are doing now by buying up all the low-end stuff nobody wants.

  15. 15
    David Losh says:

    RE: corndogs @ 14

    How did this get a thumbs up?

  16. 16
    David Losh says:

    RE: David Losh @ 15

    Exactly what I thought.

  17. 17
    interested says:

    RE: David Losh @ 15 – Corndogs wants to enlighten everyone on the service he provides — women of the world RUN!!!!

  18. 18
    corndogs says:

    RE: David Losh @ 15 – thumbs up? Haha aren’t you in your 50s..?

    I accidentally clicked on your name on the post and it brought me to another website. You’ve got to be kidding me!.. You actually have a site where you talk to yourself everyday about the same crap you put on here? Here’s a quotes from your main page

    “The fact is that with all the stimulus that has been thrown at this recession we should have some inflation, but we don’t, we only have higher prices”. hahaha! priceless.

    You’re like Yogi Berra except instead of baseball it’s real estate!

  19. 19

    RE: corndogs @ 18 – I’d also note that the site is rather hypocritical. Per the site, Seattle Bubble is a sales site–but what is his site? And before answering that, remember Dave has said the only reason he activated his license is to get “referral fees” from sending buyers and sellers to other agents.

  20. 20
    David Losh says:

    RE: Kary L. Krismer @ 19

    I don’t collect referral fees. It’s a waste of my time.

  21. 21
    David Losh says:

    RE: corndogs @ 18

    Higher prices, like a higher price per barrel in oil isn’t inflation, it’s just higher prices.

    in·fla·tion/inˈflāSHən/
    Noun:
    1.The action of inflating something or the condition of being inflated.
    2.A general increase in prices and fall in the purchasing value of money.

    Note the term general.

  22. 22

    By David Losh @ 20:

    RE: Kary L. Krismer @ 19

    I don’t collect referral fees. It’s a waste of my time.

    Okay. . ..

    I remember you saying that you only became associated with a brokerage so that you could collect referral fees. If that’s not why you’re associated with a brokerage, then why?

  23. 23

    RE: David Losh @ 21 – Dave actually got that one right! Higher prices of one commodity or even a type of commodity (e.g. vegetables due to drought) is not inflation. At least it’s not the type of inflation that the Fed should be dealing with.

  24. 24
    David Losh says:

    RE: Kary L. Krismer @ 22

    I have clients who I refer out, like yesterday I referred a non profit low income housing developer to WaLaw. It’s a good fit.

    There are also about a dozen Real Estate agents who I trust, maybe more.

  25. 25

    RE: David Losh @ 24 – But you can do that without being associated with a brokerage. So if you aren’t interested in the referral fees, why are you associated with a brokerage?

  26. 26
    David Losh says:

    RE: Kary L. Krismer @ 25

    Number one, I don’t work for tips, and tips alone. A waiter gets 15%, a Real Estate agent only gets 3%, as you pointed out.

    So a waiter makes 5 times more than a Real Estate agent? Is that correct?

    The waiter just brings the food, is pleasant, and makes sure you are comfortable. A Real Estate agent finds the product, packages the product, takes on the liability of the product, presents, negotiates, helps with escrow, provides expertise, and in the end only gets 3% of the total, OK to be generous, because it’s a team effort, 6% which is half of what the waiter gets.

    On top of that you still have to pay for the meal so the waiter gets the tip off the top of everything else. .

    I have a license to help people, or to do my own deals.

  27. 27
    2kt says:

    RE: David Losh @ 26

    The waiter makes 15% of what, $100 may be, at best. The real estate agent makes 3% of $100,000, at the minimum. Dave, you make no sense. What’s new.

  28. 28
    corndogs says:

    RE: 2kt @ 27 – Actually, after looking at Daves site, I can no longer poke fun at him… he’s like an elderly retard dude,,, and it’s not cool to poke fun at retards… so i’m done with that, Good luck Dave at your business cleaning peoples houses your a good person and we all are routing for you. !!

  29. 29
    corndogs says:

    RE: Kary L. Krismer @ 23 – You only get that right if you explain that the price of some things going up are not part of the basket of goods included in CPI and give some some attempt at clarity…. He doesn’t do that on his site. He says there isn’t inflation and then says the price of oil is making all things go up.in price….. So it does qualify as a standard Loshism…

    By the way, we ARE experiencing inflation … In 2009 we had deflation true, but since then we’ve been having absolutely standard levels of inflation on par with pre-bubble levels… note (2000-2004 in link below, compare with 2010-2012).

    http://inflationdata.com/inflation/inflation_rate/currentinflation.asp

  30. 30

    RE: David Losh @ 26 – You don’t need a license to do your own deals. Are you talking about capturing the commission on an LLC (or other entity) purchase?

  31. 31

    By 2kt @ 27:

    The real estate agent makes 3% of $100,000, at the minimum. Dave, you make no sense. What’s new.

    That’s not true. There are condos in the $30,000 range, although for that range the seller will sometimes increase the commission over 3%.

  32. 32
    David Losh says:

    RE: 2kt @ 27

    The waiter makes 15%, and you pay for the meal. Many waiters, I mean a lot, make more than a Real Estate agent.

  33. 33
    David Losh says:

    RE: corndogs @ 28

    Yeah, well, it’s just a blog site.

    It’s called internet presence, that’s the goal. I come here to see how Tim Ellis will promote his SeattleBubble site, It just happens to be about Real Estate.

    Many Real Estate agents have websites, or blog sites. My site at http://www.DavidLosh.com had been my Real Estate website since 1998. It now talks about cleaning, and business.

    I took the technology of a Real Estate site, and applied it to cleaning services for a second site at http://www.aSpringCleaning.com That site dominated the Google search for cleaning in Seattle.

    I have no idea what I’m doing online, but it seems to be working. Our business has doubled in size, and scope since 2001.

    I still lease our cleaning site at http://www.SeattleHouseCleaing.com but our other sites I converted to WordPress in 2009. It takes between two to four hours per day to maintain our sites.

    Tim does a great job of monitoring this site, and this site, in my opinion, has great potential. I appreciate he has resisted the temptation to junk up the site with ads.

    I’m here to learn. If you want to engage me with nonsense, go ahead, it’s nothing to me.

    What I think, and know is the internet is a great tool, and the more I learn the more proficient I’ll be.

  34. 34
    David Losh says:

    RE: Kary L. Krismer @ 30

    You’re kidding, right?

    The only question you should be asking is why I use a desk fee office rather than have my own Brokerage so I could collect more commission dollars. The answers the same, it’s a waste of my time.

  35. 35

    RE: David Losh @ 33 – No, I’m not kidding. Why do you pay fees to the NWMLS, etc., if you don’t seem to want to collect any revenue? You’ve said 6% is not enough for you. You’ve said you are not interested in referral fees. So why don’t you just take your license to inactive and save a few bucks?

  36. 36
    Jonness says:

    By Kary L. Krismer @ 31:

    By 2kt @ 27:

    The real estate agent makes 3% of $100,000, at the minimum. Dave, you make no sense. What’s new.

    That’s not true. There are condos in the $30,000 range, although for that range the seller will sometimes increase the commission over 3%.

    How many tips does a waiter get per month compared to a RE agent? There are so many variables, I’m not sure any of this line of reasoning is useful.

  37. 37
    David Losh says:

    RE: Jonness @ 36

    It’s extremely useful because the commission, which is tossed around like it was some huge, unfathomable number is less than a tip for doing a Real Estate transaction.

    It’s not the fault of professional Real Estate agents that so many people hire some one who thinks Real Estate is a commission sales position.

    Any one can get a license because you never know who will be good at the business, but Real Estate is a multi billion dollar business.

    The consumer has a choice, they can pay a commission, and get nothing, or hire some one who knows what they are doing.

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