Case-Shiller Tiers: Low tier home prices edged up in July as mid and high tiers slipped

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: < $410,654 (up 0.5%)
  • Mid Tier: $410,654 – $660,032
  • Hi Tier: > $660,032 (up 0.05%)

First up is the straight graph of the index from January 2000 through July 2018.

Case-Shiller Tiered Index - Seattle

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

Case-Shiller Tiered Index - Seattle

Only the low tier was up month-over-month once more in July. The middle tier and high tier both fell.

Between June and July, the low tier increased 0.6 percent, the middle tier fell 0.1 percent, and the high tier dropped 0.2 percent.

Here’s a chart of the year-over-year change in the index from January 2003 through July 2018.

Case-Shiller HPI - YOY Change in Seattle Tiers

Year-over-year price growth was down compared to June in all three tiers, but they were all still in double-digit territory. Here’s where the tiers sit YOY as of July – Low: +16.0 percent, Med: +11.9 percent, Hi: +10.6 percent.

Lastly, here’s a change-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 28.3 percent above the 2007 peak for the low tier, 31.8 percent above for the middle tier, and 34.7 percent above for the high tier.

(Home Price Indices, Standard & Poor’s, 2018-09-25)

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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.

19 comments:

  1. 1
    Eastsider says:

    “Current standing is 28.3 percent above the 2007 peak for the low tier, 31.8 percent above for the middle tier, and 34.7 percent above for the high tier.”

    The last paragraph above is the most telling. According to Payscale, Seattle’s wages have climbed 20.3% since 2006. So today’s home prices have exceeded 2007 peak by 8% to 15% based on wages. Sure, today’s mortgage rate is lower than 2007 by about 1.5% (2018@4.87% vs 2007@6.35%). But the rate is trending higher and will likely be in the mid 5% sometime next year.

    Not predicting a crash here but you need to be prepared for a downturn if mortgage rates head higher from here.

    https://www.payscale.com/payscale-index/cities/compensation-trends-seattle-metro-area

  2. 2
    Justme says:

    RE: Eastsider @ 1

    But wages at peak-bubble in 2007 did not support the price levels of the bubble. So what your numbers really say about the 2013-2018 bubble is that it is *even less* supported by wages than the 2002-2007 bubble. I guess we knew that already, but it is nice to put some numbers on it.

  3. 3
    Joe says:

    RE: Eastsider @ 1

    The Payscale data only factors in cash compensation, so it leaves out equity compensation, which has been skyrocketing due to rising stock prices. This has supported high home prices to date, but what happens if stock prices drop 30%, which is a distinct possibility? The RE prices will drop. Things are not as stable as they seem.

  4. 4
    Eastsider says:

    RE: Joe @ 3 – What percentage of Seattle workers have equity compensation? 10%? S&P500 index is now 4 times its lowest value hit following the crash. Again, that gain is limited to a small group in the population. I doubt the median household shares much of the equity growth in the past decade.

  5. 5

    A Realtor Was Astonished in 1999 When I Bought a Modular Home With Its Own Land

    She wanted me to pay a lot more for a stick home. Low Tier price hikes now, with no middle/high tier price increases to Tim’s charts clearly support this path. Did I make a bad decision? Property taxes up 40%, did I make a bad decision? LOL….with OVERPOPULATION worsening in Seattle I kind of knew affordability would come likely come crashing down, eventually…in general over the long haul. It has.

  6. 6
    Eastsider says:

    RE: Justme @ 2 – It does not mean that a crash will occur. The numbers look grim but in many cities they are much worse.

  7. 7
    Troy Thiel says:

    Worth noting too is the drop in sf units sold….if my MLS math is right…897 SF Units in 17 Sold in August…703 in 18….a drop of 21.6%…would be interesting to extrapolate at what price tiers the drops were more/less prominent..then cross search for condominiums…those/low/mid tier buyers have fewer and fewer options in Seattle and the entire market…and condo appreciation has been tracking up as a result they are more affordable…

    On a side note…total units sales now vs the best year ever would be a good thing to look at…and the issue of affordability that is leading fewer and fewer to become home owners…which is a major issue that we have to resolve…new condo build and conversion laws…and some sensible up zoning/allowing for more low density 2-4 types (Did you see what Vancouver just did with sf zoning?) and allowing residential uses in more commercial/retail/industrial zones…all with an eye to one word..more “Affordability” availability in housing increases for our community

  8. 8
    N says:

    Not sure if this has been posted, but local schools in higher income areas are seeing much lower than expected enrollment figures this fall

    https://www.seattletimes.com/seattle-news/education/seattle-schools-enrollment-lower-than-expected-18-schools-will-lose-staff/

  9. 9

    By Justme @ 2:

    RE: Eastsider @ 1

    But wages at peak-bubble in 2007 did not support the price levels of the bubble. So what your numbers really say about the 2013-2018 bubble is that it is *even less* supported by wages than the 2002-2007 bubble. I guess we knew that already, but it is nice to put some numbers on it.

    But the sun was setting in the west in 2007 and again in 2013-2018, which has about as much to do with not supporting prices after 2007 as did the wage levels changes at the time. Did you miss the news about the economic events that occurred in 2007 and 2008?

  10. 10
    Justme says:

    RE: Kary L. Krismer @ 9

    It is a problem that Kary does not understand whether the cart or the horse came first. Unsupportable housing prices came first, and caused the financial crisis. Not the other way around.

  11. 11
    Matt P says:

    Interest rates up again today as expected. Mortgage rates will pass 5% soon.

    Only 10% of the population with equity is definitely enough to impact housing prices. If 10% of mortgages are in default, it’s called a crisis, so 10% no longer having equity pay to bid up houses would also cause a huge impact.

  12. 12

    By Justme @ 10:

    RE: Kary L. Krismer @ 9

    It is a problem that Kary does not understand whether the cart or the horse came first. Unsupportable housing prices came first, and caused the financial crisis. Not the other way around.

    It’s a problem that Justme doesn’t understand the difference between national and local events. Local prices did not cause our problems in either 2007 or 2008.

  13. 13
    Jake says:

    Anyone think this interest rate hike will lead to more buyers in the near future? Probably a lot of people want to lock in their rates….

  14. 14
    Justme says:

    RE: Kary L. Krismer @ 12

    LOLOLOL. So the buyers in Seattle had not speculated and indebted themselves in excess of their ability to pay, and depending on continuing price gains, but people in other locations had. Alrighty, then. Oh, those terrible Phoenicans and Las Vegans (or are there other contenders for the top spot?). They sure ruined all the profits in Seattle. Not our fault! LOL, sarc alert.

  15. 15
    Eastsider says:

    RE: Jake @ 13(Savvy) People who wanted to ‘lock in’ their rates already did so a year ago, when rates were 1% lower and monthly payments $350* lower. It is imprudent to buy in the late cycle and a possibly declining market. But that’s just my opinion.

  16. 16
    uwp says:

    RE: Jake @ 13 – I doubt it.

    They trotted out the “people will rush to buy before rates go up” line in the past. I think higher rates mean you have to spend more money per month for houses and it depresses the number of able buyers. Same with the higher taxes.

    I may disagree with some commenters here about how much it affects the market, but it is certainly a negative for buyers.

    Kary and others have mentioned the price-mix being a big reason for the recent drop, as well the anecdotal signs of higher priced listings sitting longer. It’s not a surprise that homes close to a million (and over) are hit hardest by the last 6 months:

    Interest Deduction Capped at 750k – Negative for Million dollar homes (-$1k in tax savings)
    State Tax Deduction Capped at 10k – Negative for Million dollar homes (-$1k in tax savings)
    Property Taxes up 20% – Negative for all buyers (+150/monthly payment)
    Interest rates up ~1% – Negative for all buyers (+400/monthly payment)

    I had commented in the past about the breaking point being somewhere around what a dual income tech worker can afford, and with the recent changes, that may be in the 800k-1million range.

  17. 17
    Matt P says:

    By uwp @ 16:

    RE: Jake @ 13 – I doubt it.

    They trotted out the “people will rush to buy before rates go up” line in the past. I think higher rates mean you have to spend more money per month for houses and it depresses the number of able buyers. Same with the higher taxes.

    I may disagree with some commenters here about how much it affects the market, but it is certainly a negative for buyers.

    Kary and others have mentioned the price-mix being a big reason for the recent drop, as well the anecdotal signs of higher priced listings sitting longer. It’s not a surprise that homes close to a million (and over) are hit hardest by the last 6 months:

    Interest Deduction Capped at 750k – Negative for Million dollar homes (-$1k in tax savings)
    State Tax Deduction Capped at 10k – Negative for Million dollar homes (-$1k in tax savings)
    Property Taxes up 20% – Negative for all buyers (+150/monthly payment)
    Interest rates up ~1% – Negative for all buyers (+400/monthly payment)

    I had commented in the past about the breaking point being somewhere around what a dual income tech worker can afford, and with the recent changes, that may be in the 800k-1million range.

    Could also be a change in the market if the proposed rescinding of the H4 (spouse working visa of H1-B) comes about. It was created just about the time house prices went really crazy and if 125k spouses suddenly can’t work anymore, that’s a lot of mortgages that probably can’t be afforded. That’s not a lot for the whole country, but it’s at the margins where the changes happen that cause a tipping point.

  18. 18
    Accidental-gentrifier says:

    Developers in Hong Kong offer private financing for home purchasing as rates increase. Different situation but peculiar enough that I wanted to share.

    https://www.reuters.com/article/us-hongkong-property-analysis/hong-kong-property-firms-scramble-to-lure-buyers-as-rate-hikes-loom-idUSKCN1M60JL

  19. 19
    David says:

    RE: Accidental-gentrifier @ 18 – So you’re saying historically low inventory is somehow causing a housing surplus?

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