Written by William Hillis, Research Editor & Publisher, RSIR
Beginning about nine months ago (September 2018), readers of this blog were cautioned against accepting a narrative then spreading that home prices were falling in Seattle, according to the Case Shiller Home Price Index published by S&P Dow Jones. In reality, what was happening at that time was the onset of a series of lower monthly index results, which still reflected residential price growth, yet reduced the year-over-year trajectory of the index. (As previously described, the Case Shiller index is a measure of residential [i.e., single-family] resold home prices in King, Snohomish, and Pierce counties. The regular index excludes condominium sales as well as new construction.) In stories that continued through the end of 2018, the Seattle Times and other sources portrayed the index decline as an outright drop in Puget Sound home prices.
Throughout the fall and winter, reports from this blog regularly challenged this misinterpretation of the Case Shiller Index. Every month, we presented data from the Northwestern Multiple Listing Service (NWMLS) that proved home prices were resilient. However, year-over-year, residential price growth in the region continued to steadily contract. Now that the warnings have subsided, the once-misreported home price decline has finally arrived.
January 2019 saw the seventh and last consecutive negative monthly change in the Seattle index, and the seasonally adjusted change in the index was 0.1 percent higher to May from April. Yet that was not enough to compensate for the downshift from the index result a year ago, which in turn reflected a 13.6-percent increase from the prior year.
Of the charts below, Chart A shows the Seattle metro’s 12-month slide on Case Shiller in comparison with five cities whose residential prices have advanced moderately over the same period. Chart B that follows is a familiar illustration that we have used in each Case Shiller report since January 2019 to show the shrinking year-over-year increases among Pacific Coast gateway cities. In previous months, we used this chart to show how Seattle’s waning momentum was closing the gap with the other gateways. While those cities hang on with one or two percent year-over-year gains, with effect from May, residential price growth in Seattle converted to a downturn.
“Though home price gains seem generally sustainable for the time being, there are significant variations between YOY rates of change in individual cities,”[1] Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices observed in the S&P Dow Jones press release accompanying the index results. He added, “Seattle’s home price index is now 1.2 percent lower than it was in May 2018, the first negative YOY change recorded in a major city in a number of years.”
Above: Seattle’s year-over-year Case Shiller index monthly increase has now crossed into negative territory.
New listings were higher in May, followed by a year-over-year decline in June, according to NWMLS data.[2] Conditions we described in our coverage of the April 2019 Case Shiller report continue to prevail:
In the preceding three years, new listings regularly exceeded monthly inventory by many hundreds during the spring, with demand driving time on market in the most desirable areas to two weeks or less. Yet in 2019, the gap between new listings and inventory has been razor-thin, as homes for sale are taking longer to close. Listing brokers and sellers of most residential homes should consider all these factors—price, market times, and current inventory—when deciding upon the duration of a listing and promotional efforts required to sell it.
Do the Case Shiller Index results point to a buyer’s market for the Puget Sound region? Not necessarily, and certainly not yet.
A buyer’s market customarily refers to six months in inventory. In May, there were just over six weeks in residential inventory throughout the tri-country region; and still less than two months in Seattle and on the Eastside. This means that sellers remain in a strong bargaining position, but careful pricing in consultation with a knowledgeable broker will be key to a successful sale.
Above: While Case Shiller indicates that residential prices in other Pacific Coast gateway cities remain one to two percentage points higher year over year, Seattle’s monthly index increase has now passed them to the downside.
For more details on the May 2019 Case-Shiller Index results, download the S&P Dow Jones Case-Shiller summary report. For a copy of our 2018/2019 Market Report, along with details on the implications for homes in your neighborhood, contact a local RSIR broker. Waterfront home buyers and sellers: see our 15-month 2019 waterfront report at RSIRWaterfront.com.