i also have some friends that bought before selling their old house. one couple bought a ~$1M house in a very affluent suburban town near Boston (one of the best school districts in the state). they tried to sell their downtown Boston condo, but put it on the market with a ridiculous price (their realtor “bought” their listing). It sat. And sat. And sat. They paid two mortgages for seven months. Finally, it sold for more than $150K below the original list price. Ouch! I think they can afford the “loss”, though. I hope!

I also have friends in Seattle that bought a house on Mercer Island before they sold their house in Seattle (moved because the schools in their Seattle neighborhood were not good). I haven’t spoken with them since July, but their Seattle house had been on the market since April, and two deals had already fallen through due to buyers not being able to get financing. I hope they found a buyer before this current craziness started!

I think you’re right. At some point, however, you have to consider that if you’re affluent you’re *probably* selling a house in order to buy a nicer one. There really aren’t that many people around right now that are suddenly affluent and don’t already own a house.

In that situation you have two choices. You can either make your purchase contingent, which is a nail in the coffin of the purchase if the sale is taking longer (because it’s a lower end home). Or, you can just buy that new house and then sell the old one. A lot of people have been in that situation in other parts of the country and were too confident in the market and the sale of their old place.

I know someone down in San Diego who was in that situation and it was very painful for them. Things went from “Oh, it’ll sell – it’s a great house” to “I just want to get rid of that "golly" house” pretty quickly. It took 3 or 4 (not sure) price decreases and nine months. Several buyers fell through due to financing, and this was BEFORE all the recent turmoil and further tightening of lending.

This is the very definition of “motivated seller” and it is *those* sellers that will drive down prices, especially now they’ve seen what has happened in other parts of the country.

Anyone out there live in Kirkland? I find it VERY VERY hard to believe that the median value of Kirkland homes went up 40% in a year. A 40% increase in the median price of sold houses, sure!

This surely is the biggest argument for “a change in the mix of sales” that I’ve ever seen. I mean honestly, just look at the numbers! 40%? Come on! No analysis required there…

The median price of homes currenly listed is $1.649M.

The median price of homes currently subject to inspection (STI) is $3.42M.

There are 10 homes STI out of 152 total listings in all price categories.

There are zero homes STI out of 40 homes listed under $1M.

There are 2 homes STI out of 96 homes listed under $2M.

There are 8 homes STI out of 55 homes listed over $2M.

definitely a possible scenario. for friends of mine that have school-aged kids and like their current schools, the last thing they want to do is move their kids. so, more stability for those districts, right?

however, how many families stretched to buy homes in those excellent school districts with ARMs, and now won’t be able to afford their loan reset, and are not able to refi their house because they lowered their credit score by charging furniture for their new-to-them house to their credit card?

if they are in a highly desirable area (i.e. excellent school districts), at least they have a better chance of avoiding foreclosure by selling their house.

it sounds like you are saying their have been a lot of speculators/flippers in Seattle area that have driven up prices? i also saw that happen in Boston, with everyone and their plumber brother-in-law buying two-families and flipping them as condos for quite a tidy profit. it really drove the two-family market off a cliff, to the point that the only people buying two-family houses were the flippers, because they cost way too much to buy and rent out one of the units (fairly low rents in Boston compared to buying). Now, people are having trouble selling their two-families because they are still priced too high, but most of the flippers have left the market.

it will be interesting (for me :) ) to continue to compare Boston’s RE decline to the SF Bay RE decline to the Seattle RE (potential) decline.

The affluent will be the least affected by lending restrictions. They aren’t bothered by such trivial details as 20% down requirements. Won’t that fact further skew median sales prices upward as cash-poor, credit damaged would-be buyers drop out of the middle and lower end of the market because they cannot secure a mortgage?

It seems like a mindset of buying a house to live in might minimize the number of ‘motivated’ sellers, which would reduce supply and better support current prices.

From what I’ve seen in Boston (lived there from 2000- 2006) and now the SF Bay Area, I’d say you are spot on. It took a while to register the price decreases in Boston because of this.

I think if individual properties were evaluated to determine the price decrease/increase, this may (or may not?) illustrate your point a bit better. For example, compare recent sales prices (or even asking prices) for houses in each of your locations (South County, Seattle, North County, Eastside) to comparable houses from the past year. It would be more work to compile that data and do the evaluations, but I think it may give a better picture of what is going on.

Another point I’d like to add, and maybe this could be added to your analysis, although it might be difficult to get all the info., is the effect that good school districts have on keeping the home prices up.

From my observations (not data reviewed), in both the Boston area and on the SF Peninsula, sales are relatively brisk for communities with the combination of excellent proximity to jobs and excellent schools. Even now, when adjacent, but less desirable communities have really started to have price drops and large decreases in sales, it is not unusual for houses with excellent locations and excellent school districts to still go for asking price or above.

Thanks again for all your data crunching!

http://blog.seattlepi.nwsource.com/realestate/archives/119647.asp

Microsoft’s 7.1 percent local growth rate “might be considered a slowdown for them, but that’s still pretty darn quick growth,” Gonzalez said.

Hmmm, sounds familiar.

I’d add to support your theory on the artificial price increases in the Seattle area is meaningless, re: the “long-term” picture.

How many of these $300-600K units were just “100% equity flipped properties” with a little extra cash to cause the increase from older baby boomers?

Remember John Lennon’s “Imagine” song? Imagine when all the 100% equity property owners retire soon to cash in and are left with paultry new world order $45K average Seattle household income first time buyers to support their retirements.

Horrifying thought isn’t it.

What is the true measure that should be used to understand the price trends? Is there a publicly available measure that compares historical prices of a particular home to the recent sale price?

That’s the question of the hour, Johnny. The Case-Shiller Home Price Index (see related posts) does a better job of measuring actual home prices than the median does, although it is not without its own shortcomings.

I’m still working with the numbers, trying out things like what Deejayoh suggested above, to hopefully come up with an additional metric we can look at for Seattle. I’ll keep you all posted.

Thanks for the positive feedback, everyone.

It’s been said many times before and in many different ways:
MEDIAN PRICE STATISTICS CAN BE MISLEADING WITH RESPECT TO TRACKING OVERALL MARKET TRENDS!

Yes, each one was going to be priced around 600K, but sitll, yuppies and telecommuters with dish-sized WiFi connections camped out in Gortex(TM) tents for the eventually first ‘bid’ on this little piece of paradise…. its true! Like Angelina Jolie, some were even discussing letting their biological clocks tick out, so they could scrape a little more child-free profit from their Microsoft contractor jobs before adopting from diversely culturally lands afar (a good notion considering Ballard’s about 99.9% suburban white) so they could afford the neg-am, no-docs.

Too bad, sadly the prankster was apprehended and burned at the stake by over-zealous, hyper-leveraged first time buyers willing to get a piece of the Norwegian dream here in B-town. Yep, its true, no new glossy 600K townhomes… that’s right Meshugy, its going to be a Ballard Wal*Mart!!! I know, I know, but think of all the diversity it’ll bring!