May 06, 2007

Cool tool - check out the Case-Shiller home price index and home price city graphs

Rising prices bring people (speculators, first time buyers) into the markets, making prices rise faster.

Falling prices push people away from the market, making prices eventually fall faster.

Got it?

Ever get to the tip top of the roller coaster climb, and you can tell you're just about to go down a really big hill? The dread, the excitment, the tumble into the unknown, the front cars plunging while the back cars clueless about what's to come...



Anonymous said...

Yeah, if you read the MSM the foreclosures are hitting low-price neighborhoods because of sub-prime loan defaults.

Unfortunately the affordability factor rose dramatically in upper class areas as well, and a lot of the purchasers had to strain to buy in. I have a friend who's a mortgage broker in a nice area and he says a lot of the buyers have been using non-traditional products in order to buy in. These people have respectable incomes but haven't seen the growth in their salaries commensurate with the market prices, hence the non-traditional loan use. If these folks default, the plunge will be certain.

SeattleMoose said...

Shiller Home Price Indice Summary:

Index - City, State (trend)

370 - Los Angeles, CA (trend: down)
340 - San Diego, CA (trend: down)
320 - Miami, FL (trend: flat)
310 - San Francisco, CA (trend: down)
280 - Washington DC (trend: down)
270 - New York, NY (trend: down)
270 - Phoenix, AZ (trend: down)
270 - Tampa, FL (trend: down)
250 - Las Vegas, NV (trend: down)
240 - Boston, MA (trend: down)
240 - Seattle, WA (trend: up)
210 - Minneapolis, MN (trend: down)
195 - Chicago, IL (trend: flat)
190 - Portland, OR (trend: flat)
180 - Denver, CO (trend: down)
160 - Detroit, MI (trend: down)
160 - Atlanta, GA (trend: down)
145 - Charlotte, NC (trend: flat)
140 - Cleveland, OH (trend: down)
125 - Dallas, TX (trend: down)

Here is a cut and paste outlining the methodology:

The S&P/Case-Shiller Home Price Indices are based on observed changes in home
prices. They are designed to measure increases or decreases in the market value of
residential real estate in 20 defined MSAs (see Tables 1 and 1a below). In contrast, the
indices are, specifically, not intended to measure recovery costs after disasters,
construction or repair costs, or other such related items.

The indices are calculated monthly, using a three-month moving average algorithm.
Home sales pairs are accumulated in rolling three-month periods, on which the repeat
sales methodology is applied. The index point for each reporting month is based on sales
pairs found for that month and the preceding two months. For example, the December
2005 index point is based on repeat sales data for October, November and December of
2005. This averaging methodology is used to offset delays that can occur in the flow of
sales price data from county deed recorders and to keep sample sizes large enough to
create meaningful price change averages.

All I can say is this:

1) Seattle prices have increased 240% in 10 years
2) We are the ONLY city still moving UP
3) Expect us to overtake places like Las Vegas and Tampa soon (those are big time bubbles but we are just moving into our "rightful place")

There is no bubble in Seattle because the fact we are moving up only proves that Seattle is the most desirable place to live in the country. We are special. We are the only place in the country where they are "not building anymore land" BUY NOW or BE PRICED OUT FOREVER!!!! ITS A GREAT TIME TO INVEST IN SEATTLE RE!!! WOO HOO!!! KEEP THE WINE AND CHEESE PARTIES GOING!!!

This proves what I have been saying all along. Seattle is one of the last dominos to fall (although I didn't know it was THE last one) and that you don't want to be the only one standing tall when the music stops. At that point, everywhere else will look like a better buy than Seattle, and then we truly will be SPECIAL. The canary in the coal mine for Seattle will be the incoming vs outgoing U-Haul rates.

Anonymous said...

Except that you have been saying this for 2 years now and the first car hasn't fallen yet.

Obviousity Principal said...

``Except that you have been saying this for 2 years now and the first car hasn't fallen yet.''


In '29 it took the stock market a number of years to actually fall---even after it started. And it was overvalued for years before it started to fall.

Sometimes these things take time, you know.

SeattleSally said...

1) Seattle prices have increased 240% in 10 years

Back in 1970 after the "Boeing Bust," you could buy a nice house in a great area of Seattle for $20,000. I wouldn't be surprised if, in a few years, we go "bust" again. Everyone I know who's bought a house in the last few years has used one of those "exotic" mortgages....

a.creampuff said...

If you extrapolate those plots from years prior to the run up, does that give a reasonable estimate as to where the prices ought to be today?

Eyeballing it on a few of them, it looks like we're due a 25%, 30% drop or more if you project the curve from prior to its shooting up at a 45-degree angle (or exponential!).