Earlier this week, S&P Dow Jones released the August 2018 monthly results of their CoreLogic Case Shiller Home Price Index. Until two months prior, the Index had shown Seattle leading the nation in residential (single-family) home prices for 21 months. That run was brought to an end by a surge of prices in Las Vegas; and while prices in Seattle have continued to advance, the pace has slackened in the weeks since.
The Seattle Times announced the August Case Shiller report with an article titled, “Average Seattle-area home selling for below list price for first time in 4 years.” This story by the Times real estate reporter Mike Rosenberg described “a hectic market [that] has finally calmed down for burned-out buyers,” and observed that “just in the past month, Seattle-area home prices dropped more than anywhere else in the country, according to the new Case-Shiller home price index released Tuesday. The index showed the region’s largest monthly drop in home prices since the late stages of the housing bust.”
This is a confusing claim that we seek to correct with this post. A decline in the index in no way translates into a loss of value for Seattle or Puget Sound homeowners relative to those in the rest of the U.S.
S&P Dow Jones’ own press release for the August report announced that Seattle remains among the three cities with the fastest-rising home prices nationwide over the past twelve months. “Las Vegas, San Francisco and Seattle reported the highest year-over-year gains among the 20 cities. In August, Las Vegas led the way with a 13.9% year-over-year price increase, followed by San Francisco with a 10.6% increase and Seattle with a 9.6% increase. Four of the 20 cities reported greater price increases in the year ending August 2018 versus the year ending July 2018.” 
The Times article also reported that “for the first time in four years, the average house sells for a bit below the listing price in Seattle and across the surrounding metro area.”
S&P Dow Jones CoreLogic Case Shiller treats the residential home market in the Seattle Metropolitan Statistical Area (MSA) as “Seattle” for its home price index. The Seattle MSA comprises King, Snohomish, and Pierce counties. Within this region inclusive of the city of Seattle, only residential sales are counted in the Case Shiller Index. Realogics Sotheby’s International Realty calculates that, contrary to the Times report, this broader region has seen consecutive months of home prices averaging to selling price discounts from listing prices twice in the past four calendar years. For single family homes and condos, these periods were October 2015 through January 2016, and May 2014 through February 2015 for residential and condominium sales combined. For residential sales only—those counted by Case Shiller in their price index—the earlier run of discounts began in July 2014 rather than in May of that year.
The Times article next reminds us that “this is Seattle, a place where the asking price had become merely a starting point destined to be bid up.”
Yet the bidding up of asking prices in the region has always been somewhat oversold. Certain high-demand/supply constricted communities like Ballard and North Seattle, as well as high-end Eastside communities have certainly seen competitive bidding that has continued for multiple quarters. However, this phenomenon was not universal across the Seattle metropolitan region. Furthermore, it is natural that as the upward trend of prices slows, ambitious sellers will find that the listing prices they computed on the unmodified trajectory will have outrun buyers’ expectations. Those sellers might then willingly make some adjustment to close the deal. Stories like this one seen in regional daily newspapers are a factor in these negotiations between buyers and sellers, as they arm each buyer with a case for price reduction.
However, all parties of a real estate transaction must balance potentially counterfactual “information” about prices against the reality that demand for homes has not subsided. New buyers, whether they be investors, new residents lured by area employers, downsizing homeowners, or apartment-dwellers, are steadily entering this market; and each is competing against others for the most desirable properties for sale. “We focus on the economic trendlines and not the headlines,” said Dean Jones, President & CEO of Realogics Sotheby’s International Realty (RSIR) said in a recent post. “This normalization trend in housing means buyers and sellers are finding greater balance. It’s actually a healthy turn that I think will result in a stable market ahead—and stability benefits both buyers and sellers.”
Finally, the Times article dolefully observed, “In all, sales prices have dropped nearly 7 percent, or $55,000, in Seattle since the spring.”
This finding does not dismay experienced professionals and well-educated sellers. Real estate is a seasonal market, and a spring-to-fall decline in prices is seen year after year, regardless of market conditions. This has been the case throughout Seattle’s historic run-up in home prices, and will continue to be the case whether prices rise unimpeded or reach a temporary plateau.
A superior measure of whether home prices are still rising is to compare them year-over-year by the quarter or the month. For residential and condominium prices combined, August median prices in the Seattle MSA rose by 10.1 percent from 2016 to 2017, and by 6.7 percent from 2017 to 2018. This was the last month factored by the Case Shiller Index. In September, the equivalent prices in the region rose by 12.8 percent from 2016 to 2017, and by 5.4 percent from 2017 to 2018. For the city of Seattle itself, the year-over-year median price increase rose from August to September: from 2017 to 2018, August prices were up by 3.3 percent, while September prices were 12.5 percent higher than those a year ago.
Home prices vary broadly with the region, but the overall trends of seasonality and the resilience of the upward trend are both visible in most communities. Although 23 of 33 cities RSIR surveyed saw prices lower from August to September, 28 of these 33 cities saw higher median prices year over year. Cities now seeing lower median selling prices include those exhibiting some of the highest increases in recent years: Bellevue, Mercer Island, and Redmond. Yet in September, more than half (16) of the 33 cities saw double-digit monthly median price increases. These included Burien, Issaquah, Renton, and Woodinville.
At the county level, median prices in both Pierce and Snohomish counties were up year-over-year. King County median prices were up year-over-year and month-over-month as well, defying the routine seasonal pattern.
For Seattle’s comparative performance on the Case-Shiller Index, see our chart of the Index trends below; and for more details, download the S&P Dow Jones Case-Shiller summary report. For details on the implications for homes in your neighborhood, contact a local RSIR broker for their latest analysis.
 “Annual gains fall below 6% for the first time in 12 months according to S&P CoreLogic Case-Shiller Index,” press release, S&P Dow Jones Indices, 30 October 2018.
 “Annual gains fall below 6% for the first time in 12 months according to S&P CoreLogic Case-Shiller Index,” press release, S&P Dow Jones Indices, 30 October 2018. Northwest Multiple Listing Service (NWMLS) database. NWMLS is not responsible for RSIR’s compilations.