Case-Shiller Tiers: High Tier Surpasses 2007 Peak Pricing

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: < $306,265 (up 0.5%)
  • Mid Tier: $306,265 – $488,630
  • Hi Tier: > $488,630 (up 0.6%)

First up is the straight graph of the index from January 2000 through February 2016.

Case-Shiller Tiered Index - Seattle

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

Case-Shiller Tiered Index - Seattle

All three tiers increased once again in February. The high tier had decreased in January, but saw the largest increase in February.

Between January and February, the low tier increased 0.6 percent, the middle tier rose 0.8 percent, and the high tier was up 1.4 percent.

Here’s a chart of the year-over-year change in the index from January 2003 through February 2016.

Case-Shiller HPI - YOY Change in Seattle Tiers

Year-over-year price growth was up in the middle and high tiers compared to January. It was down slightly in the low tier, but still double-digits. Here’s where the tiers sit YOY as of February – Low: +10.5 percent, Med: +12.3 percent, Hi: +10.5 percent.

Lastly, here’s a decline-from-peak graph like the one posted yesterday for the various Case-Shiller markets, but looking only at the Seattle tiers.

Case-Shiller: Decline from Peak - Seattle Tiers

Current standing is 10.4 percent off peak for the low tier, 3.7 percent off peak for the middle tier, and 1.4 percent above the 2007 peak for the high tier.

(Home Price Indices, Standard & Poor’s, 2016-04-26)

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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.

57 comments:

  1. 1
    Mike says:

    In the actual city of Seattle, the 2007 price peak was passed close to 2 years ago and now we’re 20-40% above it depending on the location and property type.

  2. 2
    Som says:

    RE: Mike @ 1 – There is a famous tale of a Frenchman and an American diplomat at the UN trying to solve a problem. The American says, “We will do this, this, and that and the problem will be solved”. The Frenchman replies – “Yes, yes. We all know it will work in practice but will it work in theory?”.

    When it comes to Seattle RE, we know the ground reality since a while. The data and the theories are catching up…

  3. 3
    Saffy The Pook says:

    Tim,
    If you take that first graph back farther in time and extrapolate the pre-2004 trendline, I think you’ll find that we’ve reverted to a long-term mean. In other words, even if the bubble hadn’t happened, it’s reasonable to say that we’d be at current prices anyway. Where we go from here is anyone’s guess but I’d say the most likely scenario is that price acceleration slows and we keep rising at the pre-2003 rate. In other words, a slow leak, not a pop.

  4. 4
    Sam Hunter says:

    Inventory at almost record lows, high paying jobs everywhere, population growth and a lack of new housing… and the great contrarian indicator of every real estate expert and their landlord mom calling a bubble.

    This blog needs to be renamed to seattlenorm.com

  5. 5
    Action says:

    By Sam Hunter @ 4:

    Inventory at almost record lows, high paying jobs everywhere, population growth and a lack of new housing… and the great contrarian indicator of every real estate expert and their landlord mom calling a bubble.

    This blog needs to be renamed to seattlenorm.com

    This.

    I feel like in 2006-2007, it was the contrarians calling a housing bubble while the masses were flipping homes and buying second and third properties with their home equity. Now it’s flipped and everyone is calling this a bubble and say there is no way rising prices can be sustained. Yet prices keep rising.

    I’ve heard from more than one acquaintance who has been thinking about buying a house but said they’re going to hold off until prices aren’t so crazy. While this is anecdotal, how can prices drop much when there is this pent up demand? It’s only a matter of time before these type of buyers capitulate and settle for something outside the city. Or get desperate, make lifestyle sacrifices, and take on more leverage than is comfortable.

  6. 6
    ESS says:

    When is a bubble not a bubble, but a classic economic response to a severe shortage of product that is necessary? We might be able to live without tulips, but people need housing in one form or another.

    And if it is true that there are so many people sitting on the sidelines waiting for the market to be “more rationale”, won’t that pent up demand prevent prices from dropping too much in a softer real estate market?

  7. 7
    Richard Kuklinski says:

    House prices need to tie to income. Once profitless startups (including Amazon) stop hiring and start firing, house prices will equilibrate with economic reality.

  8. 8
    Blake says:

    It’s only up and up as far as the eye can see!

    U.S. Growth Falters Amid Consumer, Business Caution (4/28/16)
    http://www.wsj.com/articles/u-s-first-quarter-gdp-advances-at-0-5-pace-1461846715

    Industrial production (-2%), Total business sales, and capacity utilization are all in a nosedive:
    https://confoundedinterest23.wordpress.com/2016/04/20/industrial-production-and-total-business-sales-yoy-hint-recession/

    Blue Chip Consensus GDP forecasts keep dropping… but not as fast as the actual GDPNow estimates from the Atlanta Fed!!
    https://confoundedinterest23.files.wordpress.com/2016/04/atgdpg.png

    But luckily Seattle is immune to the business cycle and our local companies like Amazon, Boeing and the high tech employers will never experience any loss of sales or cut back their labor force! Here in Seattle everything keeps going up and UP… and everyone gets a pink pony!! :-)
    Buy now because everyone knows that housing is always a great investment and prices never fall! Why would they??

  9. 9
    Azucar says:

    Buy now before you get priced out forever!!!!!

  10. 10

    RE: Blake @ 7
    Yes Blake

    With Trump in control Boeing will have to pay 35% tariffs on outsourced plane parts…..making it intuitively obvious to bring parts manufacturing back to America [hopefully Seattle] or pay the tax penalty.

    Ahhhhhhh….$30-50/hr jobs back in Seattle again? Did anyone say REAL ESTATE SURGE?

  11. 11
  12. 12
    Buyer says:

    By Som @ 2:

    RE: Mike @ 1 – There is a famous tale of a Frenchman and an American diplomat at the UN trying to solve a problem. The American says, “We will do this, this, and that and the problem will be solved”. The Frenchman replies – “Yes, yes. We all know it will work in practice but will it work in theory?”.

    When it comes to Seattle RE, we know the ground reality since a while. The data and the theories are catching up…

    what is the ground reality that you know about Seattle RE?

  13. 13
    Anthony Cacallori says:

    By ESS @ 6:

    When is a bubble not a bubble, but a classic economic response to a severe shortage of product that is necessary? We might be able to live without tulips, but people need housing in one form or another.

    And if it is true that there are so many people sitting on the sidelines waiting for the market to be “more rationale”, won’t that pent up demand prevent prices from dropping too much in a softer real estate market?

    I can imagine a scenario where we’re in the “exponential phase” of an s-shaped chart, which is followed by a flattening when demand is satiated. If I remember my econ, this is pretty common with commodities. I’d think house prices are “sticky-down”, so unless there’s some watershed event that causes everyone to sell at once, then I see no reason for prices to dramatically fall… just a thought on the ongoing “new-bubble” that’s has been called on here the last several years.

  14. 14
    greg says:

    RE: softwarengineer @ 9

    or maybe it would give excuse to move off shore and make planes elsewhere. After all it is very clear Boeing is in the process of detaching itself from our higher NW costs and will eventually move south and east.
    unless there is a major change in WA and or the USA , we will not see Boeing focus growth in this region again. Boeing face extreme competitive pressures that are set to increase over the coming decades as more countries try to play in the space.

  15. 15
    Blake says:

    RE: Anthony Cacallori @ 12
    Re: “I’d think house prices are “sticky-down”, so unless there’s some watershed event that causes everyone to sell at once, then I see no reason for prices to dramatically fall…”

    Yes, that’s a good point Anthony… house prices tend to be “sticky down” as people don’t want to cut their prices and want to get enough to pay off their debts, but I do see some reasons why prices might fall dramatically… The baby boomer bubble is retiring and looking to sell and move away, household formation is lagging, AND the next economic downturn may be even worse than the last!! …continuing a pattern since we deregulated capital markets in the late 1990s. Contra 2008: now Japan’s economy is contracting at an alarming rate, China is in much worse shape with faltering growth and insane debt levels, and Europe is still mired in a depression that is much worse than they experienced in the 1930s… and they cannot stimulate their economies by running deficits due to the Euro!
    Other than that… everything is looking up! :-)

    (It should also be pointed out that if interest rates started to return to historic norms, the housing market would collapse. But I don’t see this as a remote threat as the ongoing problem with the world and US economy is debt-deflation and the central banks are panicking because their monetary tools are useless against this problem. Interest rates will stay at depression lows… and not for good reasons.)

    I see no reason why we should avoid a recession as the business cycle is endemic to capitalist markets and human behavior… and I see no reason why the next recession will be “mild”… in fact all indications are that it will be severe and I am not sure how the Fed and government can help stimulate economic recovery? Interest rates are already cut to the bone… perhaps President Hillary (Trump?) may try to put through a “huuuuge” jobs program, but the Republican hold on the House will nix that and force Americans to swallow their austerity medicine… evidently the Republicans now see Europe as their model!?

  16. 16
    Sid says:

    By Sam Hunter @ 4:

    Inventory at almost record lows, high paying jobs everywhere, population growth and a lack of new housing… and the great contrarian indicator of every real estate expert and their landlord mom calling a bubble.

    …….

    Add “Amazon stock at all time high” to that list.

  17. 17
    Doug says:

    RE: Sid @ 15 –

    Exactly. The city of Seattle just got a little richer after hours…

  18. 18
    Erik says:

    Amazonians should rent this condo on the water… It’s only a 15 minute commute to the Amazon campus to boot!

    http://seattle.craigslist.org/see/apa/5561287724.html

  19. 19
    Justme says:

    About the Amazon 2016-04-28 q1 earnings report:

    Special focus is on AWS (Amazon Web Services), hailed by wall st as the high-margin savior of Amazon’s low margin retail business. How well is AWS doing? Q1/2016 versus Q4/2015:

    AWS revenue, q4/q1
    % 2566/2405
    1.067

    AWS profit margin q4/2015
    % 687/2405
    0.286

    AWS profit margin q1/2016
    % 604/2566
    0.235

    CONCLUSION: AWS Profit margin dropped from 28.6% to 23.5%. or 5.1 percentage points. Not pretty. Once people figure this out, the after hours pop in the stock price will likely reverse.

  20. 20
    Sam Hunter says:

    RE: Blake @ 14

    Baby boomers looking to sell and move away? Not with their Bernie Sanders supporting kids like Blake living in the basement! If they downsize he will have no home!!!

  21. 21
    ESS says:

    By Sam Hunter @ 19:

    RE: Blake @ 14

    Baby boomers looking to sell and move away? Not with their Bernie Sanders supporting kids like Blake living in the basement! If they downsize he will have no home!!!

    According to numerous sources I have reviewed, more and more baby boomers are rejecting the typical retirement community lifestyle, and returning to urban areas that have major universities. One example of such an area is Seattle and the UW. And for many Californians, prices in the Seattle area are a downright bargain compared to the prices and real estate taxes they pay for real estate in the major Californian cities , and some Californians still look to the Northwest as a place to relocate when they retire. Furthermore, Millennials are numerically the largest age group in the US, and surveys indicate that they are starting to get to the age where they will start to form households and start thinking about buying a place for themselves.

    The truth is no one knows what the future will hold, and the best we can do is make intelligent guesses based on economic and market trends. Barring any unexpected political or economic swans, I would suggest that the price of real estate in this area will continue to drift higher over the next few years, as demand simply outstrips supply.

  22. 22
    Sid says:

    By Justme @ 18:


    CONCLUSION: AWS Profit margin dropped from 28.6% to 23.5%. or 5.1 percentage points. Not pretty. Once people figure this out, the after hours pop in the stock price will likely reverse.

    Those margins were 16.9% last year. They are investing a lot and that impacts margins quarter to quarter —- operating income more than tripled for AWS.

    Amazon is not going to double or triple anymore as a stock however it will continue to grow, add thousands of high paying tech jobs and be a big positive for the local economy.

  23. 23

    By Sid @ 15:

    Add “Amazon stock at all time high” to that list.

    How widespread is employee stock ownership and grant of options in lieu of higher pay? I thought that was cut back on several years ago.

  24. 24
    Doug says:

    RE: Kary @ 22:

    I could be wrong, but I thought I heard from a buddy who works there that no one has a base higher than $160k – anything above that is in some sort of equity package.

  25. 25
    Blake says:

    By Sam Hunter @ 19:

    RE: Blake @ 14

    Baby boomers looking to sell and move away? Not with their Bernie Sanders supporting kids like Blake living in the basement! If they downsize he will have no home!!!

    No Sam… I’m a near-retiring boomer. Sold two of our houses last year and bought a nice one with acreage on an island. Though we still keep one house in the city… could rent a room if you need one… say $1,500 a month? :-)

    I do feel for the millennials and the younger generation today. Higher ed is almost unaffordable, housing is ridiculous, and good jobs are hard to come by. I was lucky… But, I am so glad to see the young kids are getting more politically active and voting for Bernie! Too bad the “Democratic” party is not very democratic and run by the plutocrats… and the Repugs are just insane! So – unfortunately – there is really no political outlet for real change w/in the system. No checks and balances anymore… not a good situation.

  26. 26
    Blake says:

    By Doug @ 23:

    RE: Kary @ 22:

    I could be wrong, but I thought I heard from a buddy who works there that no one has a base higher than $160k – anything above that is in some sort of equity package.

    RE: Doug @ 23

    Yup… Amazon doesn’t pay that well for most. I have a friend who’s been working with AWS and he does OK, but should be making tons as hard as he works. I know at least a half dozen former employees who left and hated the way AMZN treats workers. They are not generous and only the very wealthy get much in the way of stock options, so that 12% stock bump after hours today goes to the 1% – – if that.

  27. 27
    Blake says:

    By Sid @ 21:

    By Justme @ 18:


    CONCLUSION: AWS Profit margin dropped from 28.6% to 23.5%. or 5.1 percentage points. Not pretty. Once people figure this out, the after hours pop in the stock price will likely reverse.

    Those margins were 16.9% last year. They are investing a lot and that impacts margins quarter to quarter —- operating income more than tripled for AWS.

    Amazon is not going to double or triple anymore as a stock however it will continue to grow, add thousands of high paying tech jobs and be a big positive for the local economy.

    Here’s a deep dive into AMZN’s numbers and accounting:
    http://davidstockmanscontracorner.com/amazon-and-the-fantastic-fangs-a-bubblicious-breakfast-of-unicorns-and-slippery-accounting/
    The whole article is worth reading for anyone living in Seattle… and note how a large portion of AWS growth is coming from Silicon Valley startup “Unicorns” – who could evaporate tomorrow!

    Just looked and even with the increased earnings reported from AWS, AMZN’s P/E ratio is around 500/1!!

  28. 28
    Som says:

    RE: Buyer @ 11 – Um…let me pull an example:
    https://www.redfin.com/WA/Bellevue/16025-SE-47th-Ln-98006/home/236748

    Sold for 759K in 11/06. Sold for 980K in 01/16 (take 100K off remodel. It’s still 880K). Go through enough of these as I have over the past year, and you’ll see that we have been past the peak pricing since a while for the good SFHs.

    One technique to buy a house in Seattle is to get high before you write your offer. Only then you’d be able to offer 200K over asking price.

  29. 29
    Justme says:

    By Sid @ 21:

    By Justme @ 18:


    CONCLUSION: AWS Profit margin dropped from 28.6% to 23.5%. or 5.1 percentage points. Not pretty. Once people figure this out, the after hours pop in the stock price will likely reverse.

    Those margins were 16.9% last year. They are investing a lot and that impacts margins quarter to quarter —- operating income more than tripled for AWS.

    Amazon is not going to double or triple anymore as a stock however it will continue to grow, add thousands of high paying tech jobs and be a big positive for the local economy.

    AWS should not be viewed as a seasonal business, and therefore should NOT be compared to last year Q1, but to the immediate preceding quarter. Then the numbers look a lot less impressive: AWS revenue was up a mere 6.7% from Q4 to Q1, and the AWS profit DROPPED from 687M to 604M. Amazon is trying to cover this up by changing their accounting of stock award expenses, making Q4 look worse so that Q1 does not look so bad, but I am not fooled. By the way that 604M of profit is 56.3% of the total profit in Q1, so AMZN is highly dependent on AWS profits. And as I said earlier, the profitability of AWS dropped 5.1 percentage points from 28.6% to 23.5%. It takes quite a spinmeister, one worthy of a wall st job, to make that into a positive. The truth is that AWS is facing very stiff competition from MSFT Azure and Google’s cloud computing offerings. Did everyone see the news that Apple is moving a significant amount of cloud computing from AWS to Google?

    Calculations:

    AWS revenue, q4/q1
    CALCULATE: 2566/2405
    = 1.067CALCULATE: 603/1071
    = 0.563025210084034

    AWS profit as fraction of total profit, q1
    CALCULATE: 603/1071
    = 0.563025210084034 (56.3%)

    PS: @Blake, yes, that is a good article by David Stockman.

  30. 30
    Anonymous Coward says:

    By Justme @ 18:

    About the Amazon

    CONCLUSION: AWS Profit margin dropped from 28.6% to 23.5%. or 5.1 percentage points. Not pretty. Once people figure this out, the after hours pop in the stock price will likely reverse.

    New data available: AMZN after hours pop did NOT reverse. Care to revise your conclusion? Is the market just delusional?

  31. 31
    Justme says:

    RE: Anonymous Coward @ 29

    Yesterday AMZN popped from 599 close to 682 after hours, Now it is down again to 657. It is sliding downwards because investors are realizing that the AWS numbers were not good. So, yeah, I’d call that a reversal in the making.

    Why don’t you instead agree that the AWS numbers were crap, and the profit margin on AWS dropped 5 .1 percentage points? AMZN even changed their methodology of assigning stock award expenses so that the Q4 number is looking worse, in order to make the Q1 AWS profit look like it is better than Q4. It was not, they are playing accounting games.

  32. 32
    Anonymous Coward says:

    RE: Justme @ 30 – I didn’t see that the futures had gone all the way to 682. Looks like you had a sound conclusion backed up with a verifiable (now verified) prediction.

  33. 33
    Sid says:

    By Justme @ 30:

    RE: Anonymous Coward @ 29

    Yesterday AMZN popped from 599 close to 682 after hours, Now it is down again to 657. It is sliding downwards because investors are realizing that the AWS numbers were not good. So, yeah, I’d call that a reversal in the making.

    Why don’t you instead agree that the AWS numbers were crap, and the profit margin on AWS dropped 5 .1 percentage points? AMZN even changed their methodology of assigning stock award expenses so that the Q4 number is looking worse, in order to make the Q1 AWS profit look like it is better than Q4. It was not, they are playing accounting games.

    You don’t realize that the general market has also gone down today from the open. Also you conveniently just took the highest point of the after market price.
    If you don’t consider a 10% rise in stock in a down market a pop then you have just made up your mind to be a bear in amazon. Can’t change that.

    btw, I looked at David Stockman’s predictions on AMZN for the last few years in the articles he has written and he has been consistently wrong (bearish). Just because someone can write well doesn’t mean he/she is a good forecaster.

  34. 34
    Justme says:

    RE: Sid @ 32

    >>I looked at David Stockman’s predictions on AMZN for the last few years in the articles he has written and he has been consistently wrong (bearish). Just because someone can write well doesn’t mean he/she is a good forecaster.

    Not everything said about a stock is a forecast, and I don’t think Stockman was forecasting any particular future prices of AMZN. What he has done is to perform a fundamental evaluation of the company financial, and determined that the stock is rather wildly overpriced. With all the help from ZIRP, irrational stock prices are just as common as irrational housing prices. But some examples are more egregious than others.

  35. 35
    Action says:

    Sorry, but the day to day fluctuations in AMZN has zero effect on the housing market. No point in looking at such minute details in trying to forecast Seattle housing. Better to look at the macro forces and trends in effect.

    If you’re betting that tech is in a bubble and therefore Seattle real estate is in a bubble, you might want to rethink things. This is the new economy. Tech jobs and coding are the new manufacturing jobs. Manufacturing jobs are not coming back no matter who becomes president. Robots will eventually build the airplanes and everything else, and they’ll be built wherever energy is the cheapest. Washington has the advantage here as well.

    Let’s hope we’re not heading into another recession but if we are, I don’t think that will have much effect on Seattle house prices. Recession = interest rates stay low or drop, which increases asset prices. Recession also = decrease in construction of new houses, therefore less supply.

    The only way I see for Seattle home prices to drop in the near term is if Seattle becomes a less desirable place to live than other places in the US. That would mean other areas of the country and other industries would need to grow jobs and wages faster than Seattle in order to draw people away from this area. Do the people predicting a bubble pop actually expect this to happen? I’m not betting on continued exponential growth in Seattle, I’m simply betting that this area is positioned to do better economically relative to the rest of the country and people will continue to move here. As long as population exceeds the housing supply of the area, rents and housing prices will continue to rise.

  36. 36
    Blake says:

    By Action @ 34:

    Let’s hope we’re not heading into another recession but if we are, I don’t think that will have much effect on Seattle house prices. Recession = interest rates stay low or drop, which increases asset prices.

    Oh boy! I can’t wait til the next recession when the Fed will cut interest rates even more! :-)
    And nice to hear that so many think Seattle is immune to the US/World economy because…

    Former Goldman Sachs president says our economic situation ‘will end in tears’
    http://finance.yahoo.com/news/former-goldman-sachs-president-says-our-economic-situation–will-end-in-tears-153344130.html#

    John Thornton, the former president of Goldman Sachs (GS), who likes to take the long view, says he’s “feeling uneasy” about the global economy right now and thinks we’re living on borrowed time.

    “After the events of 2008, really since then, the central banks either collectively or individually have tried to implement policies which would, in effect, buy time for individual governments to take the actions they should take to put their houses in order,” Thornton says.

    “By and large, the governments have not done that. So I feel as though we’re sitting in 2016 with many of the same problems that we’ve had for the last eight or 10 years, they haven’t been addressed very forcefully, we’re living on borrowed time. And sooner or later, that ends in tears. I’m generally, sort of, uneasy with where things are. And I think by and large, if things don’t make common sense, sooner or later, they come home to roost,” he says. (end quote)

    “The difference between theory and practice is that, in theory, there is no difference between theory and practice, but in practice, there is.”
    -Tom Vogl

  37. 37
    ess says:

    By Action @ 34:

    Sorry, but the day to day fluctuations in AMZN has zero effect on the housing market. No point in looking at such minute details in trying to forecast Seattle housing. Better to look at the macro forces and trends in effect.

    If you’re betting that tech is in a bubble and therefore Seattle real estate is in a bubble, you might want to rethink things. This is the new economy. Tech jobs and coding are the new manufacturing jobs. Manufacturing jobs are not coming back no matter who becomes president. Robots will eventually build the airplanes and everything else, and they’ll be built wherever energy is the cheapest. Washington has the advantage here as well.

    Let’s hope we’re not heading into another recession but if we are, I don’t think that will have much effect on Seattle house prices. Recession = interest rates stay low or drop, which increases asset prices. Recession also = decrease in construction of new houses, therefore less supply.

    The only way I see for Seattle home prices to drop in the near term is if Seattle becomes a less desirable place to live than other places in the US. That would mean other areas of the country and other industries would need to grow jobs and wages faster than Seattle in order to draw people away from this area. Do the people predicting a bubble pop actually expect this to happen? I’m not betting on continued exponential growth in Seattle, I’m simply betting that this area is positioned to do better economically relative to the rest of the country and people will continue to move here. As long as population exceeds the housing supply of the area, rents and housing prices will continue to rise.

    I would generally agree with your above assessment. Not only do people move here for jobs, but when they lose those jobs they are hesitant to leave the area. Understandable, there is something for everyone here – all sorts of outdoor activities very close to the urban core, as well as a flourishing cultural scene. Often laid off workers will take a less desirable job in the Puget Sound area rather than leaving to get a job in another part of the country.

    Alternatively, I would suggest that prices would drop a bit more if we did have a major recession and higher unemployment. But as you say, that would be tempered by even lower interest rates, less construction, and the fact that most folks would still have jobs. When we have our next recession (and we will), housing prices may drop even 10-20% as a result, but those prices will rebound and increase 30-40% when the recession is over. Housing prices generally tend to increase in a stair like upward motion over time, reacting to the positives and negatives of the economy. You are correct, folks tend to think short term. Back in the 70s – everyone thought the world was coming to an end, and one was risking big money if one bought a house for 25-40K in city where the last person leaving was instructed to turn out the lights. Those houses easily sell for 20-30 times what they did then.

    Add to the fact that Puget Sound is restrained by both natural boundaries and the Urban Growth Management Act ( which now puts even more pressure on housing prices), single family houses, especially affordable ones, are becoming a smaller percentage of the housing stock in the area. Chances are that housing, especially affordable single family housing, will remain fairly stable over time, especially in light of the fact that no one is building new affordable single family houses on a decent size lot anywhere near Seattle.

  38. 38
    SFraz says:

    Could this impact the area? Military plutonium production sites remain among the most contaminated sites on Earth. During the period of operation more than 67 metric tons of plutonium were manufactured at Hanford. Hanford is home to 60% (by volume) of all of the high level radioactive waste stored in the United States. Nearly 80% of the Department of Energy’s inventory of spent nuclear fuel rods are stored just 400 yards away from the Columbia River.
    http://www.counterpunch.org/2016/04/29/hanford-not-fukushima-is-the-big-radiological-threat-to-the-west-coast/

  39. 39
    Cap''n says:

    RE: SFraz @ 37

    No. Hanford is a non-issue for Seattle metro region.

  40. 40
    redmondjp says:

    By Cap”n @ 38:

    RE: SFraz @ 37

    No. Hanford is a non-issue for Seattle metro region.

    Yup. Don’t listen to local media, as they turn up the Hanford hyperfear dial to eleven every time they do a story on the place. My dad spent his entire 38-year career at Hanford and I worked there for several years as well.

    The biggest risk to the Seattle area is the subduction zone earthquake – our area will be devastated beyond our wildest imaginations when this take place (no significant human-made structures were present here when the last one occurred). The best advice is to have a go-bag (I prefer a full-frame backpack myself) with you at all times, as it’s more than likely that you’re going to have to walk wherever you need to get afterwards and you will want to have your survival pack with you.

    Got earthquake insurance?

  41. 41
    SFraz says:

    RE: redmondjp @ 39 – I’ve had several people explain what to place in a go-bag. There was a small earthquake here several years ago (prior to my move). One of my friends had to walk home (downtown Seattle) as there weren’t any buses moving. She had her handy dandy bag. Thanks for the Hanford info.

  42. 42

    By redmondjp @ 39:

    By Cap”n @ 38:

    RE: SFraz @ 37

    No. Hanford is a non-issue for Seattle metro region.

    Yup. Don’t listen to local media, as they turn up the Hanford hyperfear dial to eleven every time they do a story on the place. My dad spent his entire 38-year career at Hanford and I worked there for several years as well.

    The biggest risk to the Seattle area is the subduction zone earthquake – our area will be devastated beyond our wildest imaginations when this take place (no significant human-made structures were present here when the last one occurred). The best advice is to have a go-bag (I prefer a full-frame backpack myself) with you at all times, as it’s more than likely that you’re going to have to walk wherever you need to get afterwards and you will want to have your survival pack with you.

    It’s not like there aren’t major earthquakes elsewhere, and many occur closer to major cities than what a subduction quake would to Seattle–but there are other faults that run closer, but those would be smaller (but still large) quakes.

    I agree on supplies, but you may need far more than what you could carry with you.

  43. 43
    Blurtman says:

    Perhaps The Tim could do a similar analysis for the Seattle area.

    The Unfairness of Housing Purchases Through Time

    “The cash cost measured by of weeks of labor time of a residential property in 2015 is approximately twice as high as what it had been in the golden years of the early 1970s. Similarly, when that cost reached its apex in 2006, it was also approximately twice the cost in terms of weeks of labor time that buyers had to face in the first half of the 1980s.”

    http://www.nakedcapitalism.com/2016/04/the-unfairness-of-housing-purchases-through-time.html

    And looky there, a definition of what interest rates should be: “a fair interest rate is such that the purchasing power of one hour of labor stays constant through time, even when its monetary equivalent is lent or borrowed. This occurs when the nominal interest rate is equal to the growth rate of nominal wages.”

  44. 44
    Justme says:

    RE: Blurtman @ 42

    The statement about the interest rate is, uh, interesting.

    “a fair interest rate is such that the purchasing power of one hour of labor stays constant through time,”

    That part does not sound too bad, but are we talking about the purchasing power relative to consumer goods, or for assets such as houses and factories? I think the last 30 years have shown that this is an important distinction. And what if there are no wages (jobs) to be had? In other words, the criterion only works if every one has a job.

    “This occurs when the nominal interest rate is equal to the growth rate of nominal wages.”

    That means that when workers lend their meager savings to the capitalists, all the capitalists have to do to get away with paying 0% interest is NOT to increase wages at all. I can’t see that being a good system.

    It is sort-of like trickle-down economics, without the trickle (as is always the case), implemented by the Fed, for the top 0.1%.

    In other words, whoever came up with the interest rate criterion was sort-of onto an idea, but it turned to contain some major loopholes that would pauper the laborer in the long run. Much like the way the US economy is working since, oh, maybe 1980?

  45. 45
    Azucar says:

    By Erik @ 17:

    Amazonians should rent this condo on the water… It’s only a 15 minute commute to the Amazon campus to boot!

    http://seattle.craigslist.org/see/apa/5561287724.html

    15 minutes from your hovel south of Alki to the Amazon campus at South Lake Union? Even if the commute is at 3 am on Thursday morning it would be longer than that. In morning rush hour, wouldn’t 15 minutes get you part way across the West Seattle Bridge from there? With the heavy traffic still ahead of you?

  46. 46
    Justme says:

    RE: Blurtman @ 42

    Oh, but otherwise I liked the nakedcapitalism article. It is a good site that I read regularly.

  47. 47
    ESS says:

    By Blurtman @ 42:

    Perhaps The Tim could do a similar analysis for the Seattle area.

    The Unfairness of Housing Purchases Through Time

    “The cash cost measured by of weeks of labor time of a residential property in 2015 is approximately twice as high as what it had been in the golden years of the early 1970s. Similarly, when that cost reached its apex in 2006, it was also approximately twice the cost in terms of weeks of labor time that buyers had to face in the first half of the 1980s.”

    http://www.nakedcapitalism.com/2016/04/the-unfairness-of-housing-purchases-through-time.html

    And looky there, a definition of what interest rates should be: “a fair interest rate is such that the purchasing power of one hour of labor stays constant through time, even when its monetary equivalent is lent or borrowed. This occurs when the nominal interest rate is equal to the growth rate of nominal wages.”

    ——————————————————————————————————————————-

    While there are many interesting theories as to why it takes the working person longer to afford a house, there are obvious reasons that sometimes gets overlook in all the theory that is presented. Those reasons, in no particular order of importance include by are not limited to

    -Housing has become increasingly bigger and fancier over the years.
    After world war two, the average family home was about 1000 feet. Now the average home is over 2000 sq feet, with many houses much bigger than that
    The number of garages per house has increased from none or one to three or four
    Fixtures throughout the residence have become more ornate and expensive
    Kitchens, once practical places to prepare meals have become fancy showcases including expensive cabinets constructed with exotic woods, fancy counters made of granite and other such materials and fancy stainless steelplated appliances. As the kitchens, along with the rest of the houses have become so much bigger, much more material is needed to install them, and more labor will be involved

    Bathrooms – in the past one or two plain ones have been replaced with three or four oversized fancy club like facilities with huge tubs, multiple sinks with fancy cabinets and tops, all completed with top of the line materials

    Even floors, which once was simple linoleum or carpet has given way to expensive exotic wood floors.

    The land in cities has become more expensive for a variety of reasons:
    -US population has increased dramatically over the years
    -Regulations and environmental concerns have also increased the expense of developing land. You had nothing like the number of regulations on the books 50 years ago when developing land.
    -Land has been removed from availability as a result of combatting sprawl, maintaining open spaces, or for wetland protection as well as other government edicts.
    -The US population has increasingly become more urbanized over the years, increasing the demand for buildable lots in cities and their suburbs
    -Immigration, legal and illegal has also increased the demand for land in urbanized areas, as many immigrants migrate to the larger population centers

    Builders are faced with more regulations and red tape, both as to developing the lots, building the houses as well as paperwork for their employees. They don’t pay for those expenses, they pass them on to the consumer in the form of more expensive housing.

    Comparing the type and construction of housing of 50 years ago or earlier to the houses of today is like comparing Model T cars to modern Ferraris. Yes, they are both cars, but that is where the comparison ends.

  48. 48
    David B. says:

    RE: Azucar @ 44 – North-facing unit, too. So almost no direct sunlight. When you’re in one of the cloudiest metro areas in the country, that’s a big downer.

  49. 49

    By ESS @ 46:

    While there are many interesting theories as to why it takes the working person longer to afford a house, there are obvious reasons that sometimes gets overlook in all the theory that is presented. Those reasons, in no particular order of importance include by are not limited to

    -Housing has become increasingly bigger and fancier over the years.
    After world war two, the average family home was about 1000 feet. Now the average home is over 2000 sq feet, with many houses much bigger than that
    The number of garages per house has increased from none or one to three or four
    Fixtures throughout the residence have become more ornate and expensive

    Two points on this.

    First, this happens because we want those things AND can afford them. We can afford them now more than in the distant past due to the rise of two income houses, and maybe lending options, although the 30 year mortgage has been around a while.

    Second, the mix of houses available changes slowly. You can still buy that two bedroom, one bath house built before 1950. That affects the mean/median and a buyer’s options.

  50. 50
    Blurtman says:

    RE: ESS @ 46 – Absolutely, we are consumers, and want more, better, newer. But one can ale ask why the value of labor has not kept up.

    And Kary’s observation about two income families can mean asset price inflation.

  51. 51
    Blurtman says:

    By Justme @ 43:

    RE: Blurtman @ 42

    “This occurs when the nominal interest rate is equal to the growth rate of nominal wages.”

    That means that when workers lend their meager savings to the capitalists, all the capitalists have to do to get away with paying 0% interest is NOT to increase wages at all. I can’t see that being a good system.

    It is sort-of like trickle-down economics, without the trickle (as is always the case), implemented by the Fed, for the top 0.1%.

    In other words, whoever came up with the interest rate criterion was sort-of onto an idea, but it turned to contain some major loopholes that would pauper the laborer in the long run. Much like the way the US economy is working since, oh, maybe 1980?

    But it may also mean that the credit vipers can’t suck as much blood. If you are borrowing to buy an asset, you are paying less money. Of course, asset price inflation may be a result. Folks that aren’t borrowing to get on The Asset Train, or that aren’t using cash to jump on, seem to be seeing no benefit. Safe investments aren’t paying squat.

    By Justme @ 43:

    RE: Blurtman @ 42

    The statement about the interest rate is, uh, interesting.

    “a fair interest rate is such that the purchasing power of one hour of labor stays constant through time,”

    That part does not sound too bad, but are we talking about the purchasing power relative to consumer goods, or for assets such as houses and factories? I think the last 30 years have shown that this is an important distinction. And what if there are no wages (jobs) to be had? In other words, the criterion only works if every one has a job.

    Hey, Yellen warned everyone. Get on The Asset Train, she said quite a while ago, and Enjoy the ride. That meant that asset prices would rise, a boon to asset holders. And who likes miserable renters, anyway? What can poor Janet do about flaccid wages? Like Obama, she has kept this nation from a Great Depression, and as Hillary says, America is Great Now!

  52. 52
    ess says:

    By Kary L. Krismer @ 48:

    By ESS @ 46:

    While there are many interesting theories as to why it takes the working person longer to afford a house, there are obvious reasons that sometimes gets overlook in all the theory that is presented. Those reasons, in no particular order of importance include by are not limited to

    -Housing has become increasingly bigger and fancier over the years.
    After world war two, the average family home was about 1000 feet. Now the average home is over 2000 sq feet, with many houses much bigger than that
    The number of garages per house has increased from none or one to three or four
    Fixtures throughout the residence have become more ornate and expensive

    Two points on this.

    First, this happens because we want those things AND can afford them. We can afford them now more than in the distant past due to the rise of two income houses, and maybe lending options, although the 30 year mortgage has been around a while.

    Second, the mix of houses available changes slowly. You can still buy that two bedroom, one bath house built before 1950. That affects the mean/median and a buyer’s options.

    ———————————————————————————————————–

    Kary

    Your first point – I agree with. We want all sorts of things that are now considered essential that were once considered luxury items. Whether we can REALLY afford them is open to interpretation. Yes we can if we maintain a 0-2% savings rate, but perhaps we can’t if perhaps Americans should be saving 5-15% of their income.

    As to the issue of the two bedroom/ one bath house. Yes they are out there, but those houses are a smaller and smaller percentage of the universe of the housing stock. Not only does the first time buyer have few options if he/she/they decide to purchase a smaller house, but as a result of supply and demand, those houses are more in demand and thus supply and demand take over the pricing structure. Furthermore, those are the first houses to go in an area of redevelopment, as they are cheaper to purchase when houses are purchased for their underlying lots.

    The problem is that of expectations. If one is going to have a 3000 sq foot house with three or four garages decked out in the latest and most expensive fixtures, one must expect to pay much more money as compared to a 1200 sq foot “starter” house that was the norm 50 -70 years ago. Even the acceptance of the term “starter house” contributes to the problem, as it establishes a mindset that unless one is in a huge new house, one has not achieved their housing goals. Thus we end up with a large percentage of home owners who are probably in houses that they really can’t “afford”, even if they can eke out the house payments each month.

  53. 53

    RE: ess @ 50 – “Able to pay for them” may have been a better choice of words than “afford them.”

  54. 54
    Warren Hutch says:

    For the longest time, Seattle couldn’t see itself as a national city and now many can’t seem to see Seattle as an international city. Until this happens, Seattle is going to follow the same trajectory as San Fran, New York, and Hong Kong with haves and have nots and no one in the middle.

    So sad to see my hometown degenerate…

  55. 55

    RE: Buyer @ 12
    Old Money Managed by Village Idiots

    That’s Seattle cash investors [no “job skin” in the mortgage game needed]….these sub par investors [with a gold spoon in their mouths] are the one’s leading the other risky mortgage lemmings to pay too much money? We should learn from them? LOL

  56. 56
    Doug says:

    The Tim, will you have April’s data at some point this week?

  57. 57
    Blurtman says:

    By softwarengineer @ 55:

    RE: Buyer @ 12
    Old Money Managed by Village Idiots

    That’s Seattle cash investors [no “job skin” in the mortgage game needed]….these sub par investors [with a gold spoon in their mouths] are the one’s leading the other risky mortgage lemmings to pay too much money? We should learn from them? LOL

    You bring up an interesting point. The popping the last time around was due to an unsustainable supply of qualified mortgagors. So your hypothesis is that when the supply of foreign all cash buyers is exhausted, pop. If so, that could take a while, and will be fed by the furreigners belief that it is time to get their money out of their country.

    I think Seattle RE companies need to list in China at double the market price, and do more promotional visits to the country.

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