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Comparison of real estate market conditions in NY City and Seattle



By understanding the fundamentals of the real estate market before Covid-19, we can evaluate which market may be more resilient going forward. Currently, two of the hardest hit metros are New York City and Seattle.
MONDAY, MARCH 30
Introduction
During the Covid-19 pandemic, the real estate industry press has been saturated with articles about the effect of social distancing, Covid-19 related layoffs, and record low interest rates. One piece of the puzzle that is missing from all the analysis is the state of the market before Covid-19 hit and how that will affect different regions' abilities to weather this crisis.

We will look at two of the metros hit hardest. By understanding the fundamentals of the real estate market before Covid-19, we can evaluate which market may be more resilient going forward. Currently, two of the hardest hit metros are New York City and Seattle.
Traditional Analysis of Seattle and New York City
Two very popular and powerful metrics used to gauge the health of a real estate market are home price indexes and sales volume. Our analysis of these two markets starts with home price indexes.
At the beginning of 2020, before the arrival of Covid-19, both New York City and Seattle were experiencing a steady increase in real estate prices. The one-year change in the home price indexes was strong without being extreme. As seen during the beginning of the subprime crisis, metro level home price indexes also continued to rise and did not provide any warning.

Home price indexes did not provide an early warning because they are focused on average price. This does not highlight the weakest houses that turn first. In 2006, prices continued to increase as sales volume decreased. This is because the subprime crisis was in part driven by financing. A smaller percentage of home buyers were able to get financing, so volume was reduced. The people who could get financing were still able to buy at the higher prices.

Given our experience during the subprime crisis, it is logical to look at sale volume as a possible leading indicator. Below is a graph of public records data available as of 2/2020. Public record sales are subject to data quality issues and delays, so this graph is shown for relative analysis, only.
Looking at this data we see that Seattle and New York have had similar trends. Both metros had strong sales volume in 2018, with 2019 showing flat sales volume. This makes it very hard to draw actionable conclusions from this data.
Weiss Data and Analysis
Weiss Analytics produces a unique measure of market health, to warn investors of coming market shifts. Weiss tracks percent of homes rising more the 2% annually. Historically, this metric is a powerful leading indicator of coming market change. Looking at percent of homes rising for both Seattle and New York, there is a noticeable difference
While Seattle's percent rising is only showing recent weakness, New York's percentages (blue) have been fluctuating for the last several years. Some of this fluctuation is due to New York's recent weakness in the high end of the market. Based on this data, a logical conclusion would be that Seattle will have a more robust recovery. New York's recovery could be more muted due to a few years of inconsistent price growth pointing to uneven demand.


Contact us at info@weissanalytics.com for more information.
Weiss Analytics provides the next generation of home price indexing, forecasting, and
analytics and is the only provider of house-specific repeat sales indexes in the US.
Founded by national housing index expert Allan N. Weiss, co-founder of Case
Shiller Weiss, Weiss Analytics combines leading industry experience,
proprietary analytics, and state-of-the-art big data computing power
to deliver revolutionary products with unprecedented resolution. Our
unique tools power better decision-making and help mitigate the financial
risk of home ownership and investments. Weiss Analytics is an independent
and trusted information source for home buyers and sellers, real estate
professionals, financial institutions, and hedge funds.


"Don't be fooled by averages. You're buying a house, not the market."