Written by William Hillis, Research Editor & Publisher, RSIR
A second consecutive monthly unadjusted increase on the S&P CoreLogic Case Shiller Home Price Index was not enough to reverse the recent steady decline in year-over-year growth for Seattle residential home selling prices. Meanwhile, “home price gains continue to slow” across the country, according to the index committee chairman.
The Case Shiller index is a measure of residential (single-family) resold home prices; the regular index excludes condominium sales as well as new construction. According to the March 2019 index, Seattle joined the other Pacific Coast gateway residential markets that have seen residential price growth languish between one and two percent year over year. Oddly, the monthly index change was equal to the year-over-year figure, up 1.64 percent. This compared well with the other gateway cities, whose monthly increases were 1.29 percent for San Diego, 1.33 percent for Los Angeles, and 1.35 percent for San Francisco. Yet while for Seattle, this was a positive change for a second straight month, the index growth has been lower year over year for ten months running. Furthermore, just as the U.S. Department of Labor was computing the annual consumer price index at about two percent, Seattle’s Case Shiller results suggest that home real estate investment in the region was set to underperform cash.
This juxtaposition of anemic home price growth with household inflation was noticed by David M. Blitzer, Managing Director and Chairman of the Index Committee. “Given the broader economic picture, housing should be doing better,” he observed in the index report. Nationwide, housing is still beating the CPI. “The difficulty facing housing may be too-high price increases. At the currently lower pace of home price increases, prices are rising almost twice as fast as inflation: in the last 12 months, the S&P CoreLogic Case-Shiller National Index is up 3.7 percent, double the 1.9 percent inflation rate. Measured in real, inflation-adjusted terms, home prices today are rising at a 1.8 percent annual rate. This compares to a 1.2 percent real annual price increase in housing since 1975.” Yet on the Pacific Coast, annual real home price returns are now negative.
Digging into the analytical recesses of the Case Shiller report finds that the SA (“seasonally adjusted”) monthly index changes have already reached the point of zero growth. In February, the monthly change was +0.6 percent NSA (“non-seasonally adjusted”) vs. +0.1 percent SA; in January, it was -0.3 percent NSA vs. +0.3 percent SA. So, to sum up, the seasonally-adjusted monthly trend for the Seattle index has been from +0.3 percent in January, to +0.1 percent in February, to flat at 0.0 percent in March.
Above: the gap between Seattle’s year-over-year Case Shiller index increases and those of other Pacific Coast gateway cities has nearly closed.
That is a distinctly downward trend for price growth in the Seattle metropolitan statistical area (“Seattle MSA,” comprising King, Pierce, and Snohomish Counties), the region covered by the Case Shiller index. It is also consistent with forward-looking remarks and community median price forecasts in Realogics Sotheby’s International Realty’s 2018/2019 Market Report published in March. It is understood that all neighborhoods, property types, and price points behave differently, as our reports have regularly indicated.
The index results were to be expected given the recent trends in residential inventory among the three counties, which reversed direction in April 2018 after tightening for four consecutive years. Inventory has been higher in every month since then, although the year-over-year difference peaked in November. As of April 2019, a gap of 2,147 homes for sale remains to be closed in order for inventory to return to the level seen the previous April, when total inventory was less than twice that amount.
Above: the upward shift in the inventory of homes for sale in the Seattle MSA occurred in April 2018, when inventory was less than one-third of the April 2019 figure.
Other recent home selling trends appear to confirm a lower course for the market. Regional home selling durations—measured by cumulative days on market, or CDOM—are lengthening as homes take longer to sell. In March, CDOM reached 15 days. This is still fewer than in 2015, but the monthly figures since last October have exceeded those of each of the preceding three years.
While the median residential price trend for the Seattle MSA remains stubbornly higher year over year, the equivalent trends for King County and the Eastside crossed to the low side of the 2018 trend months ago. The Eastside median price rebounded somewhat in March, but countywide, home prices are struggling to maintain upward momentum.
Dean Jones, owner and CEO of RSIR, remains upbeat about prices later in the year. “We anticipated that median home prices during the first quarter of 2019 would compare poorly with what were frothy price results a year prior. The current trend is expected to moderate when the monthly S&P/Case-Shiller results are posted for the second quarter, and we are likely to see a return to increases by the third quarter.”
Below: multi-year CDOM for the Seattle MSA, and multi-year median residential home price trends show that the market shift that began late last year remains in place.
For more details on the March 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.
 “S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Continue to Weaken,” S&P Dow Jones Indices, 28 May 2019.
 Katia Dmitrieva, “U.S. Core Inflation Cools Amid Shift in Data Methodology,” Bloomberg, 10 April 2019.