December 2012 Case-Shiller Potporri

Before we put away the Case-Shiller data for another month, let’s check in on a few of our alternative charts.

First up, let’s take a look at the twenty-city month-over-month scorecard. Here’s the original post introducing this chart if you’d like more details. Click the image below for a super-wide version with the data back through 2000.

Case-Shiller Home Price Index: # of Cities Experiencing MoM Gains, Losses

2012 closed with the strongest fourth quarter of any year since 2005, but it was still considerably weaker than 2000-2005.

Next up, the second derivative. For an introduction to this particular view, hit the original post from March.

Seattle Case-Shiller HPI 1st & 2nd Derivatives

The second derivative is still hovering around the 1% level. Anything above zero indicates that price increases are getting stronger each month, so this is still quite a strong signal. I still expect this to move back down toward zero throughout 2013, but possibly not until the second half of the year.

Finally, here’s a look at the number of cities that are experiencing second derivative gains or losses.

Number of Cities Experiencing 2nd Derivative (YoYoM) Gains, Losses

Stronger than any period of time except when the homebuyer tax credit was in force.

All in all, price gains are still pretty strong, though things have definitely cooled off somewhat as 2012 drew to a close.

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.


  1. 1
    Erik says:

    HPI = Case-Shiller House Pricing Index
    1st Derivative = Case-Shiller House Pricing Index in current year/Case-Shiller House Pricing Index in previous year
    2nd Derivative = Case-Shiller House Pricing Index incurrent year for a particular month/Case-Shiller House Pricing Index in previous year for a particular month

    Can someone dumb this down for me so I can put this into perspective?

  2. 2
    Mike says:

    1st derivative is the rate of change, 2nd derivative is whether the rate of change is increasing or decreasing

  3. 3
    Erik says:

    Oh yes, that calculus stuff.
    da/dx = v,velocity (rate of change)
    dv/dx = acceleration (whether case-shiller is increasing or decreasing)

    So if a = (case-schiller price index), we can think of the first derivative da/dx as the rate of change(v).
    Then the second derivative dv/dx=acceleration, and when the rate is decreasing it’s negative and when it’s increasing, it’s positive.
    I may have wasted your time, but someone out there may find this valuable… or not.
    So whenever that blue line is positive, the case-schiller price index is increasing.

  4. 4
    whatsmyname says:

    RE: Erik @ 3 – Don’t forget your non quantitative analysis: CSI is a black box. It has a good story, but
    You can’t test it,
    You can’t replicate it,
    It is done by the infallible folks at S&P, and, as Tim said last week,
    It is not directly transferable to an individual home.

    Other than that….

  5. 5
    Erik says:

    RE: whatsmyname @ 4
    I have looked for the algorithm online, but i cannot find it. There has to be one. I’m not sure why they wouldn’t release it?

    Maybe they don’t release the algorithm because it uses specific areas to calculate the price index and they don’t want anyone corrupting the data? This is just a wild guess though.

  6. 6
    Mike says:

    The question is how they identify the matched pairs.

  7. 7
    David Losh says:

    RE: whatsmyname @ 4

    Zillow has always fascinated me because they can just throw up a bunch of numbers, and when they first came out people believed them. Those numbers didn’t have to be accurate but some people got so excited by them they rushed out to refinance, and get a HELOC.

    The Case/Shiller Index has seemed to me to be along the same lines as Zillow. Case/Shiller I’m sure is better funded, but the idea is the same, it’s there to make sales talk, and to get people to do something. It makes no difference if the arrows on the graphs point to being a good time to buy or sell, as long as the consumer is doing something with Real Estate.

    That’s why I think it’s important to remind people that your home search is a very narrow area that has it’s own quirks. We joke about above or below I-90, but that boundry is pretty well established. In some neighborhoods you may be on one side of the street, and you are in a better neighborhood than being on the wrong side of the tracks.

    If you are an investor, a big time investor, buying hundreds of units the Case/Shiller Index may have some uses, because you aren’t bound geographically, and can look at broader regions. You may be comparing Detroit, to Phoenix, to Miami, to Seattle.

    Phoenix as an example is an area that has double digit price increases because the prices people pay for Bank Owned properties are higher. More first time home buyers are wading into the short sale, Bank Owned market these past two years, because there is no other choice. The first time home buyer is paying more. Investors are losing market share because the flips they were doing have shrinking margins. The market there, in some opinions, is hitting an equilibrium.

    So you can look at the numbers all day every day, but it’s a lousy way to make a home purchase decision. Your home purchase is best left to a targeted Comarative Price Analysis that will be more in line with an appraisal. In doing that you also need to be aware of the specifics of your area.

    As an example, we sold a house in Maple Leaf for $460K that had a view, we moved to the other side of Lake City Way, in Meadowbrook, and bought twice the house for $300K. A client of ours is selling her house in Ballard, and buying twice the house in Portland.

    There are always pockets of opportunity. You just need a strategy.

  8. 8
    Mike says:

    By David Losh @ 7:

    RE: whatsmyname @ 4

    As an example, we sold a house in Maple Leaf for $460K that had a view, we moved to the other side of Lake City Way, in Meadowbrook, and bought twice the house for $300K. A client of ours is selling her house in Ballard, and buying twice the house in Portland.

    There are always pockets of opportunity. You just need a strategy.

    As an example, I know someone that sold their little crackerbox in Ballard in early 2007 and bought a big suburban house in Renton. The Ballard house is still worth around what it sold for back then, the renton house is worth about 30% less…

  9. 9
    wreckingbull says:

    RE: Mike @ 8 – I can never fully decipher the Loshman’s comments, and I can’t find a Loshese button on google translate, but I think he does have valid point. Selling in an area near its zenith and downsizing to an area with more growth potential can be a very good strategy. I don’t think I would have picked Renton, but I can think of several neighborhoods in the Seattle city limits where Losh’s comments would apply.

  10. 10
    Ron says:

    RE: David Losh @ 7

    “Zillow has always fascinated me because they can just throw up a bunch of numbers, and when they first came out people believed them. Those numbers didn’t have to be accurate but some people got so excited by them they rushed out to refinance, and get a HELOC.”

    On the footer of the Zillow home page the Zestimates link explains the relative accuracy of their estimates which, I believe, is simply an algorithm driven by historical data. They do the analysis on their own estimates after a home sells and provide the median error one would expect for a specific property. It’s a nice tool to play around with but I wouldn’t use it to establish a purchase/sale price of course.

    Before Zillow, if I wanted a ball park estimate of my home value I had to ask a neighbor/realtor friend to look at comps. I did that once and it seemed like a waste of his time. Now I check Zillow every month to see what their estimate is combined with their published median error and I get a range that if one believes in mathematics is reliable. But maybe I’m missing something…

  11. 11
    David Losh says:

    RE: Mike @ 8

    I agree Renton is blighted, but Real Estate is still a long term strategy. I personally like Renton, and do think it is an area of growth. The problem there is the amount of short sales, and bank owned properties that have come on the market in the past two years. Those prices have driven down property values, and that, I’m afraid is going to be a long road to recovery.

    What excites me about Renton is the location between Seattle, Bellevue, and Tacoma. There is a lot of growth potention at South Lake Washington. Renton has an airport, and downtown Renton has extreme growth potential. Renton is also close to Boeing, and the International airport. I see great potential in job growth at both places.

    When I think of Renton, and the foreclosure market there, I also think a lot of the past home buyers were unsophisticated, and got into mortgages they never really should have had.

    So in the long run I still more potential for Renton, than Ballard, but it will be a longer time getting there.

    Now is that as clear as mud? Did I cover my ass a little bit with that one?

    To be honest, the house in Maple Leaf has retained value better than our house in Meadowbrook, which is bigger, and closer to our kid’s high school. We are one of the places the kids come to at lunch or after school. The house in Maple leaf was a block from the elementary school, so we pretty much knew everybody there.

    I don’t know what price to put on quality of life, but I hope your some one has the quality they were looking for.

  12. 12
    David Losh says:

    RE: Ron @ 10

    I agree about Real Estate agents, and getting a price opinion from them, it’s a crap shoot, and they aren’t particularly helpful if they aren’t getting a commission. What I also don’t like is that most Real Estate agents are as reliable as a Zestimate. They don’t think, or more accurately they don’t know.

    I personally like Zillow, and have a lot of faith that they might be onto something. What I was talking about are the early years when Real Estate was the hot market topic, and everybody wanted a piece of it. Now I think , as the Real Estate calms down, and reaches an equilibrium, Zillow will be a great tool for the consumer.

    I would like to see Zillow do a targeted Comparative Market Analysis for a fee. They can put in all the disclaimers they want. but I think that would be a great service to have outside of a Brokerage. We all need more second opinions.

  13. 13
    Ron says:

    RE: David Losh @ 12

    My guess is that Zillow would be more accurate during times of lower price volatility. During an inflection point when prices are moving fast it would be less reliable.

    Right now, the Zestimates for Seattle are:

    Within 5% of sale price 36.1% of the time
    Within 10% of sale price 62.5% of the time
    Within 20% of sale price 85.8% of the time
    Median error: 7.3%

    that’s pretty handy data to have, for free!

  14. 14
    mike says:

    RE: wreckingbull @ 9

    Now that I’ve lived in the Ballard area for a while (I’m in a fringe neighborhood) I’m not sure it’s at its zenith. It’s still growing and changing, and seems to be benefiting from being one of the fastest growing urban villages. The viaduct and light rail plans, while far off, I think are going to make up for some of the current shortcomings it has – getting in and out is a pain in the butt often enough. Parts are still pretty run down, especially as you get into crown hill/greenwood. FWIW, you could still find $200K homes in crown hill not that long ago.

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